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By Katherine W on Jul 27, 2009 | Reply

OK, you want to buy the stock. You can buy it at whatever it’s selling at (market). You can buy it up to a certain price, like $30 a share (limit). You know that part. Well, what if it goes down? It might start falling fast. You might not have time to get online and sell, right? So, that’s what ’stop’ and ’stop limit’ do: they are an agreement to pre-sell your shares. So, if you’re uncomfortable with the thought that you might lose all your money, you put a stop on the price, saying, “If this goes down to, say, $25 a share, sell it.” That’s why, sometimes when the market goes into free fall, they stop the entire market, because stop orders are going in and the automatic trading is causing the market to go down further, fast. It’s a way for people to protect their money. Hope that makes sense.

By Alletery on Jul 27, 2009 | Reply

Stop Order
An order to buy or sell a security when its price surpasses a particular point, thus ensuring a greater probability of achieving a predetermined entry or exit price, limiting the investor’s loss or locking in his or her profit. Once the price surpasses the predefined entry/exit point, the stop order becomes a market order.
Also referred to as a “stop” and/or “stop-loss order”. http://www.investopedia.com/terms/s/stop…
Stop-Limit Order
Order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will be executed at a specified price (or better) after a given stop price has been reached. Once the stop price is reached, the stop-limit order becomes a limit order to buy (or sell) at the limit price or better.
The primary benefit of a stop-limit order is that the trader has precise control over where the order should be filled. The downside, as with all limit orders, is that the trade is not guaranteed to be executed if the stock/commodity does not reach the limit price. http://www.investopedia.com/terms/s/stop…

By ZORCH on Jul 27, 2009 | Reply

The stop orders are your parachute. When you buy a stock, while the graph is on the screen and your fingers are over the keyboard and the stock has just this second become yours, pack your parachute. Not later, not after TV or dinner or work. Right now. Limit your loss initially to say 8 to 10%, then, if the stock moves up, move your stops up with it. Soon they will lock in a profit. And, trust me, you will sleep a lot better.

By rhsaunde on Jul 27, 2009 | Reply

A stop order specifies a price which, if the security reaches that price, becomes a market order. A stop limit order is similar, but specifies a particular price rather than a market order.

By Wordpress Amazon Autoposter Plugin on Jul 27, 2009 | Reply

You can enter a sell stop or a buy stop depending on the open position you are holding. When you have a short position, your risk is on the up side, so you can use a stop buy order to limit your potential loss. A limit stop will only work as a protective order and close your position if the price doesn’t jump or the market moves too fast through the price range of your limit stop.
Explore the use of option spread strategies to gain much higher returns from your investments.

By Pure Star on Jul 27, 2009 | Reply

If you buy long then you set a limit on how much profit you are looking for and they will sell at that price if it reaches it. Stop is if the price drops from the price you bought in at and saves you from huge losses by selling at the lower price automatically if it is hit.

By FRANKFUS on Jul 27, 2009 | Reply

It’s a pre-set amount you set on the values of your holdings. This determines when your broker will sell your stocks for you. It’s like setting a limit at poker to prevent too much loss.

By Barney on Jul 27, 2009 | Reply

I wonder if Katherine W. looks like her avitar. Fransico had a good expenation too.