Sell Limit Order
A Sell Limit Order is an order to sell a specified number
of shares of a stock that you own at a designated price or
higher, at a price that is above the current market price.
This is your limit price, in other words, the minimum
price you are willing to accept to sell your shares.
Once a stock's price trades at or above the price you have
specified, your shares will be sold at that price or higher
IF the stock's price continues to trade at or above your
specified price long enough for your order to be filled.
Example: Suppose you own 100 shares of Target Corp
(TGT), and it is currently trading at $45 per share.
You would like to sell the shares and take your profits
if the stock's price reaches $50 per share, as you feel
the stock's price is not going to go much higher than
$50.
You place a Sell Limit Order @ $50 on 100 shares of
TGT. Now suppose the price trades up to $50. As long
as the price remains above $50 per share, your shares
would then be sold at the next best available price that
is $50 per share or higher.
The main benefit of a Sell Limit Order is that you may be
able to sell the shares that you own at a minimum price
that you specify IF the stock's price raises to that
price. Sell Limit Orders are great for maximizing
profit-taking.
But, if the stock's price reaches your limit price, but then
changes direction to the downside before your order is
filled, you will still own your shares. Also, if the price
never reaches your limit price, you again will still own
those shares.
Sell Stop Limit Order
A Sell Stop Limit Order is an order that combines the
features of a Sell Stop Order with those of a limit order.
A Sell Stop Limit Order will be executed at a specified
price (or above) after a given stop price has been
reached.
Once the stop price is reached, the order becomes a Sell
Limit Order, filled at the limit price specified or higher.
Example: Suppose you own 100 shares of Bank of
America (BAC) and you are looking to sell them if
the stock's price falls a bit lower. Assume BAC is
currently trading at $45 per share. You place a Sell
Stop Limit Order for $41 on BAC, with a Limit
(minimum you're willing to accept) at $40.
Suppose BAC then proceeds to trade down to $41.
At that time, your order would become a Sell Limit
Order and your order would be filled at the next
best available price as long as the stock still trades
above your specified limit price of $40.
The main benefit of a Sell Stop Limit Order is that you
have some control over when your sell order will be
filled and you have set a minimum price you are willing
to accept to sell your shares.
As with all limit orders, there is no guarantee that your
order will be filled. If the stock price does not reach
your stop price, you will not be filled. In addition, if the
price hits your stop price, but then trades below your
limit price, you will not be filled.