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What are the pro's and con's of each type of stop sell. I have a security i would like to set a stop sell on, but it does not have a lot of volume, is a stop limit more risky than a stop market in this scenario ?

Also please correct me if i am wrong with my over simplified definitions of each type of stop sell.

Stop Limit Sets an exact price to sell a security, after a trigger price

Stop Market Sells a security at the market price, after a trigger price

Trailing Stop Limit Sells the security at a specific price if the security moves a certain percentage away from the market price (trigger delta ?)

Trailing Stop Market Sells the security at the market price if the security moves a certain percentage away from the market price (trigger delta ?)

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You're close, but here's a few corrections:

Stop Limit Sets a minimum price to sell a security, after a trigger price

Pros: useful when you want to sell after a downward trend, but still want a minimum amount received

Cons: If the price moves quickly through the trigger and stop, you might not sell your stock at all due to the minimum price.

Stop Market Sells a security at the market price, after a trigger price

Pros: Guarantees a sell after the trigger has been breached

Cons: No limit to losses that might occur if there is a large downward movement

Trailing Stop Limit Sells the security at a minimum price if the security moves a certain percentage away from the highest market price since the order was placed

Pros: Automatically adjusts trigger price (and possibly limit price) to lock in gains when there is upward movement

Cons: Same as Stop Limit above

Trailing Stop Market Sells the security at the market price if the security moves a certain percentage away from the highest market price since the order was placed

Pros: Same as Trailing Stop Limit

Cons: Same as Stop Market above

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    So realistically there is no way to guarantee a stop sale unless you chose market but you open yourself up to risk by incurring larger losses but with limit orders theres no guarantee youll sell your stock at all. Good to know! – arrydavid Jan 4 '18 at 16:21
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    Correct. It should be rare, depending on the spread between your stop and limit price, but it is a risk. – D Stanley Jan 4 '18 at 16:34
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Market vs Limit

A market order (all but) guarantees that your order will be sold, but the price may be much worse than the stop price, depending on the volume of orders on the other side (buy side, in your sell order case).

The limit order variant prevents your order to get filled at too bad a price, but it may prevent your order from being filled altogether; again, depending on the state of the other side of the order book.

Trailing vs. Non-trailing

Non-trailing order: Suppose the price of your security goes way up after you enter the stop order (market or limit, doesn't matter). If the price subsequently drops to your stop price, you will sell at the stop price (or worse), even though in the meantime, you could have sold at a so much higher price.

To fix that, with trailing stop orders you specify a price offset from the highest high reached after the order gets submitted, at which to sell. Which means your stop prices is being adjusted everytime the price of the security reaches a new high since order submission (for buy sell orders, it is of course adjusted whenever a new low is reached).

So all other costs (commission) being equal, you should always take the trailing variant. (Unless - and that may depend on your broker - they simulate trailing stops, but not non-trailing stops, which is something I don't know. Simulated orders have a risk of higher slippage, i.e. the difference between your stop price and the actual price at which your order got filled)

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You still manually track your selling stocks and don't presume thing will take care of you automatically.

I had a stop loss order something like $15 and they sold my stocks at $10. Their argument was there wasn't enough buying order at $15 so the system fed to the next order was $10. Lost a few grand but learned my lesson.

Always check $ specialist or robot with your hard earned cash.

  • Welcome to Money.SE. – Rupert Morrish Mar 7 at 18:48
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    Note that a stop limit order would have prevented this scenario - e.g. sell when it goes lower than $15 but at a price no lower than $14. Of course, someone has to be willing to buy at $14 which may not have been the case if the stock did not come back. – D Stanley Mar 7 at 19:12

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