Limit vs Stop-on-quote vs Stop-Limit-On-Quote vs Trailing Stop, etc...

[jeromedawg]

Hey guys,

I'm pretty amateur/noobish with stock trading but was wondering if someone could explain the benefits of each of the trade sale types and why I might choose one over the other.

I use Scottrade, so these are the terms I see there. Not sure if it's the same across the board at all brokerages but:

Limit Orders
A limit order is an order to buy or sell a set number of shares at a specified price or better. A limit order guarantees price, but not an execution.

Stop-on-Quote Orders
A stop-on-quote order is an order to buy or sell a security when its price surpasses a particular point, limiting your loss or locking your profit.

Stop-Limit-on-Quote Orders
A stop-limit-on-quote order is a type of order that combines the features of a stop-on-quote order with those of a limit order.

Trailing Stop-on-Quote Orders
A trailing stop-on-quote order is a trailing sell stop that fluctuates by a given percent or point (dollar) amount allowing for the potential to lock in more profit on the upside while still protecting yourself from the investment's downside.



I was trying to read through their examples/descriptions but it's still a bit confusing to me. At the end of the day, I just want to know if there's one I should be using most of the time if not always as a noob. Or is there one that carries higher risk than the others? If I just wanted to sell stock once it hits a certain point and not worry about potential issues, what would I choose? I have a UBS account and I recall them only having the "limit orders" option but I could be mistaken... that's partly why I'm confused with the additional sale options.

[MoonLiteNite]

If you are swing/day trading these matter. If you are just investing in for long term, then these don't actually matter **so much**

I will answer 3, since i use them and do not feel i will be mistaking, the others someone else can answer so i don't spread bad info.

Limit order (buy) - You put in a price, and the MM will ONLY buy the stock if the price crosses that value. If price is at 20.00 and your limit is at 19.82. Your execution will only start once the price drops to 19.82.

Stop order (buy/sell) - You put in a price, when the market hits that price. Your order is turned into a market order. Buy your buy/sell price may very if the spread is high

Trailing stop - You put can use % or $ in your value. If the price is at 20.00 and you already own shares and you put in a 1$ trailing stop, then if the price ever falls below 1$ of its highest price it will sell. So if the price hits 20.01, then drops back down, your sell order will happen at 19.01. If the price goes up to  20.50, and then back down to like 18. Your sell order should happen at 18.01.

Trailing stops i think are great for quick day trades, i use it the most. I don't think pros do it, they use hard numbers, but i like security it NOT losing money once i have a winner in hand.

edit:
Quick youtube search.
https://www.youtube.com/watch?v=R7MQsTuBWQ8
https://www.youtube.com/watch?v=TeHmx3H54jo
I would search around on investopedia, their videos look good

Them typ0s

[seattlecyclone]

I always use limit orders. When you place a market order there's a risk that you'll exhaust all the orders near the latest price and end up paying much more (or selling for much less) than you were expecting. When you buy a very popular ETF such as VTI the risk of this happening is low, but it still exists.

I've never used a stop order. That seems like something you would do if you expect the bottom to fall out of the market and you want to sell everything on the way down.

[jeromedawg]

I always use limit orders. When you place a market order there's a risk that you'll exhaust all the orders near the latest price and end up paying much more (or selling for much less) than you were expecting. When you buy a very popular ETF such as VTI the risk of this happening is low, but it still exists.

I've never used a stop order. That seems like something you would do if you expect the bottom to fall out of the market and you want to sell everything on the way down.

Thanks guys, I was leaning towards just doing a Limit order initially but then got confused with all the other 'advanced' options lol. Anyway, I placed a Limit order and dumped the stock, surprisingly, faster than I thought.

[MoonLiteNite]

If you have level 2 access you can get a better view of how your market orders will go through. Or even if you think you will get a full fill for a limit order.