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My understanding of stock market orders right now is illustrated as shown: stock market orders

However, if the price of a stock was trading at 22.00 and I wanted to enter a short position at a trigger price of 22.50 due to resistance being present at that price level, for instance, would I input a short-stop order or a short-limit order? Conversely, if I wanted to protect my short position under the same idea as a stop-loss order for a long position, would I use a buy-to-cover stop order or a buy-to-cover limit order?

Thanks.

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If the price was currently at $22.00 and you wanted to open a short position when and if the price hits $22.50, then you would place a sell stop-limit order at $22.50.

If you wanted to open a short position at say $21.50 you would place a sell stop-market order at $21.50.

Once your order has been triggered, you woul protect your position by placing a buy stop market order. You would usually place this stop loss order at the same time your placing the short sell order as part of the same order.

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A stop order is used to close out of an existing position. A limit order is used to open a position after some price threshold has been broken.

So you would use a sell-limit order to open the short position (or short-limit depending on what terminology your broker uses) once the price goes above 22.50, and a buy-stop order to cover your short position if the price goes above the limit price.

  • Actually stop orders are also used to open positions as well as close them. – Victor Jun 6 '17 at 1:18
  • Stops can be used for entries to catch favorable momentum and limits can be used for exits to take profits as well... – Signatured_ Jun 7 '17 at 3:05

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