I’m new to trading and I’m a little confused about using stop or stop limit order when selling. Which method executes the order better? From checking a few tutorials it says the Stop order will execute the price its set to so that is immediately where as the stop limit order will execute the price the limit is set to once its triggered the stop price, so my understanding is that having a stop limit is safer in case the share dips then goes back up so I’m actually getting more profit ?
When you place a STOP order, your order will be put to the market when it reaches the stop price, but it will be executed at the price available at that point, so if the price is moving fast up (if you are buying) or down (if you are selling) you may end buying or selling with a price far away from what you wanted.
If you place a STOP LIMIT order, the order will go to the market when it reaches the stop price, but it will be executed only at the limit price (or better), so you guarantee a price to buy or sell. However, there is a risk in the STOP LIMIT order, if the price moves quickly beyond your limit price, it will not get executed, and the price could continue moving in the wrong direction causing more loss.
