Setting a stop limit

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1

Hi

I’ve purchased shares at 8p, they’re currently in profit, let’s say they are 15p.

I want to sell should they fall to 9p so I’m still in profit.

I’m struggling to understand the difference between setting a STOP value of 9p or setting a STOP LIMIT.

What should I choose?

If I were to set a stop price of 9p and a limit of 8p would this mean that I’m happy for the shares to be sold at 9p but if they’re not fulfilled at the price the least I would want per share is 8p?

Thanks in advance

2

Yes. You understand correctly.

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3

The stop is the trigger point.

A normal stop will create a market order to get you the best available price once triggered.

A stop limit will turn it into a limit order once triggered so allows you set the min/max (depending if you’re buying/selling) you want the value to be.

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4

Thanks for the replies, just one more question if you don’t mind.

When I set the stop price, I presume this relates to the share price as opposed to the sell price, which is usually slightly lower that the current share price

5

Correct.

This is the amount you are willing to sell for, if the market does not go in your favor.
Just bare in mind though, that if the markets are closed and reopen at a price below your STOP price, you could end up stopping out at a price under your Stop price.

Eg:
I buy a share at ÂŁ10. Setting a stop price of ÂŁ5, if the market goes against me.
The market closes but reopens at ÂŁ3. My STOP price is triggered but sells my shares at ÂŁ3 instead of my target ÂŁ5.

6

Thanks for the confirmation. So all being well and you are settled at ÂŁ5 for example, I presume you also need to factor in the sell price might be lower than the triggered share price. So when calculating potential exit should this be taken into consideration?

Thanks

7

99% of just a normal STOP will be fine, and you would be out at ÂŁ5 as per the example.
If it does GAP down, then there isn’t really anything you could do about that, other than understand that this may happen.

In a normal real life case, you may buy for ÂŁ10.90, setting a STOP at ÂŁ9. The market may close and reopen at ÂŁ8.5, resulting in your closing price being ÂŁ8.5. Nothing you can do about this that I know of.

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