Stop order
A stop order is an order to buy or sell a stock or ETF once the stock reaches a specific price, known as the stop price. When the stock hits your stop price, the stop order triggers a market order and is executed at the best price currently available. Stop orders are used to trigger a purchase should the stock price hit or go above the stop price. Or trigger a sell should the stock price hit or drop below the stop price. Because these orders become market orders when triggered, at market open or during periods of market volatility, the trade may execute at a price far away from the stop price.
Buy stop order
With a buy stop order, you can set a stop price above the current price of the stock. If the stock rises to your stop price, your buy stop order triggers a buy market order.
Example
MEOW is currently trading at $6 per share. You want to wait to purchase MEOW until it reaches $8 because you think it’ll rise much higher, but only after it reaches $8, so you set your stop price to $8. This example is shown for illustrative purposes only. Please note that in some cases only a portion or none of your order may get executed if there are insufficient shares available at certain prices. Understanding order types can help you manage risk and execution speed. However, you can never eliminate market and investment risks entirely. It’s best to choose an order type based on your investment goals and objectives.
Sell stop order
With a sell stop order, you can set a stop price below the current price of the stock. If the stock falls to your stop price, your sell stop order triggers a sell market order.
Note
Stop orders created incorrectly or at a price that can’t be executed may be rejected. Check out Why was my order rejected for more details.
Example
You purchased MEOW for $10 a few months ago. It’s currently trading at $20 per share ($10 unrealized profit). Your goal is to make at least $5 per share if the price were to drop. So you create a sell stop order at $16.50. If MEOW reverses itself and starts to drop below the stop price of $16.50 it triggers a sell market order. This example is shown for illustrative purposes only. Note that in some cases only a portion or none of your order may execute if shares aren’t available at certain prices. Understanding order types can help you manage risk and execution speed. However, you can never eliminate market and investment risks entirely. It’s best to choose an order type based on your investment goals and objectives.
Over-reserving buying power
To protect your account against overspending, we’ll over-reserve your buying power for stop buy orders and trailing stop buy orders.
Keep in mind
These percentages might change in response to extreme volatility.
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