Stop Loss Questions and explainer - please help a dimwit

Q1 - When I try to set a Stop Loss it does not work - is this because I only have very small cash in the trade? In other words can you set a stop loss if you don’t own a complete share?

Q2 - What is a Stop Loss and is there someone who can put it in really simple baby terms as if I was properly properly stupid. I have read the forum here and a chapter in my book twice and been on investopedia and its still not simple enough.

My understanding so far.

A Stop Loss - Is put in place to potentially STOP you from loosing a ton of money. It means when the price reaches that - you have lost enough sir and you’re out - the stock will be sold.

A Stop Limit Order - Is when you LIMIT your profits - i.e. I buy Bobs Cakes at £1.00 I set a Stop Loss at 70p if I want but and or can set a Limit Order to £1.90 - this means when Bobs Cakes reaches £1.90 my shares are automatically sold.

Q3 So What is a LIMIT

If it is that easy - why does the APP seem to complicate things. In that.:

Stop:

“Set a price below the current price that converts your order to a market order”

Stop Limit

“Set a price below the current price that converts your order to a Limit Order”

“Then set the minimum price you are willing to get for a share”

“Limit”

“Set the minimum price you are willing to get per share”

WHAAT?

To make it easy for those with brains copy and paste.

1 Limit Means:

  1. Stop Means:

  2. Stop Limit Means.

0. Market Means:

Market order that will get you the best price available

1. Limit Means:

Limit order will only execute if it matches the price you have specified.


So on to stop, a stop is just a trigger point. Simple as that. When it reaches that do this.

2. Stop Means:

When the stop is triggered it’ll create a market order on your behalf.

3. Stop Limit Means:

When a stop limit is triggered it’ll create a limit order on your behalf.


So think of it as a way to avoid sitting in front of chart watching it every minute.

The most common is the sell stop, when the bid (sell price) reaches this point try and get a deal at the best price going with this market sell order.

Thanks fill - sorry about this… very happy you helped. Sorry I don’t understand. :frowning:
Is there a way to replace the words?

Limit =
Stop =

Limit = place an order but only execute if it meets your terms.

Say I want to buy at no more than 10p a share, I would create a limit buy and type in 10p. It could fill at under 10p which is a benefit but it would never fill at more than 10p so I can guarantee not to spend more than I wanted per share.

On the other way I want to sell at 14p, the order would only fill if it can get me a minimum of 14p it might get me 14.1p or above but never below that.

Stop = A stop is just a trigger point. When it reaches this price then create a market order.

So the share price is 10p, if the price goes below 5p I want to get out at whatever price I can. So I set the stop at 5p.
If the price is moving slowly I might get exactly 5p, if it’s dropping fast I might only get 4p, if it briefly touched 5p to trigger and the price returned I might get above 5p.

Stop limit = A stop limit again a trigger point but this time I set the stop at 5p and set 4p as my limit.

The order will only execute if it can guarantee a sale at 4p or higher. Obviously if the price moved very quickly below 4p it would not fill until it came back up.

You can of course have the opposite say a buy stop limit with the stop at 10p and limit to 11p to make sure you’ll never pay more than 11p.

2 Likes

Market = give me best price

Limit = give me this price or better (or not at all)

Stop = trigger a Market (see above) at this price

Stop limit = trigger a Limit (see above) at this price

1 Like

Right so

Market - Give me the best price buy or sell - if not buying this moment.
Limit - I don’t want to pay more than this for it ever
Stop - Sell my stuff when it gets this low
Stop Limit = Still stuck

hate me yet?

“if not buying this moment.”
Forget time.

A market order is give me whatever the best price. So place that market order and when it gets executed you’ll get whatever the current price is at that time.

A limit order simply states that the price you buy at will be a max of X, or a min of X when selling. It matters a lot more for intraday and swing trading where you need to get a specific entry and exit, especially if the price is moving quickly and its volatile.

Either market or limit might happen instant if say you are buying and there’s plenty of sellers lined up, or it may take longer if there’s nobody on the other side of the deal. That’s called liquidity. High liquidity and it’ll be quick for the deal to happen, low liquidity and it’ll take longer if it’s not being traded that much.

Obviously if it’s trading with an ask (buy price) of 14p, and you set a limit buy of 13p you won’t get it filled until either the price drops or a seller is prepared to reduce what they’ll sell for. Doesn’t matter how many are trading it at the time, you need both sides to agree.

And a stop (market) and stop limit is just a trigger point.

So instead of the market or limit order being placed now, it will only get placed when the stop value is reached.

Think of the stop like this.

You are in a car testing the braking at 60mph down to zero.

So it’s traveling slightly above at 70mph.

The 60mph is the trigger point (the stop) to take action.

It’s ticking down on the speedo 63… 62… 61… 60!

The stop is triggered, and the action is brake!(sell market order placed)

In the same way the share price could have been 70p and IF the price were to drop to 60p you want out.

You could sit there every minute of the day making sure it doesn’t. Or you can place a stop sell at 60p and go about your life knowing a market order to sell will be placed on your behalf if it does when you’re on the loo, at the gym, making a cup of tea etc…

A stop limit is exactly the same as above but a limit order instead. Whilst it guarantees a min on the sell it could work against you.

Say if you had that stop of 60p as the trigger point, and you set the limit as 59p. So it has to drop below 60p and will only sell if it can get 59p or more.

If it went 61p and suddenly dropped to 57p you wouldn’t get a sale with that. Because although the trigger point for the limit to be create fired when it went below 60p because it’s below the limit then you won’t get your 59p if the most is 57p. If it kept ticking down further you would be out of luck.


So you have two pairs:

market and stop (market)
limit and stop limit

The stop variations only create the order at the stop trigger point you set.

I get the speed bit - and appreciate your advice.

Late in this video the guy does an example of both and I sort of understood it a bit - I prob have to do it a few times before I get it.

One of the main things I note is that fractional shares do not work in these processes you either sell or don’t sell.

Anyway when this thread gets crawled I suspect this and your posts will be of great benefit.