How to Sell Stocks to Stop the Limit
Stop limit orders allow investors to combine the features of stop orders and limit orders to buy or sell stock at a specified price after a trigger price has been reached. A stop order guarantees a transaction after a set price has been hit and a limit order guarantees the price of the shares traded. By combining the two into a stop limit order, the investor sets a trigger for an execution, but has a floor or ceiling in case the price fluctuates too far in an unfavorable direction. Selling stock on a stop limit order minimizes the loss potential in the case of a falling stock price.
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Instructions
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Call or log on to your brokerage account. To sell stock, you must have already purchased it through a brokerage account. Access the account in which the shares of stock are held to set up a stop limit order.
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Determine the price at which you would consider selling your stock. For example, if the price of the stock you own is $30 a share, you may want to set up a protection to sell your stock if the price falls below $25.
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Determine the lowest possible price that it is worth selling your stock. If the price falls below this price, then it is no longer worth selling the stock and you are better off holding on to the stock. For example, you may set a limit of $23.
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Access the section of your account called trade stock. In that section, specify which stock you want to sell by entering the ticker symbol. In addition, enter how many shares you want to sell and select stop limit as the order type.
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Enter the stop price, or the price at which you would consider selling your stock into the activation price section. Enter the limit price or the lowest price you can afford to sell you stock into the price section. Finally click on "place order" to activate your stop limit order.
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Tips & Warnings
The benefit of placing a stop limit order is the fact that you can set a minimum price that you are willing to sell off your shares. However, setting stop limit orders should be set more as protection instead of your main way of selling stock. Try to maximize your return by setting a limit price or selling in a market order if you believe the price has reached its peak.
There is no guarantee that your stop limit order will be filled. There is always a chance that the price of the stock will never reach the stop trigger or will fall past the limit price before an execution can be made. As a result, if you need to sell your stock, the only guaranteed way to do so is through a market order.
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