is there REALLY a DIFFERENCE between limit and stop order?

Question

both allow u to buy/sell when a stock reach a particular prices. so what is really the difference? and no dont give me a defintion between these two..i already know the meaning.

give me a like a stock price example etc. or something...otherewise..dont bother trying to answer. thx in advance.

munich birder: so let me get this straigh...a limit order is only use to buy a stock at a particular price. a stop order is only use for selling stock at a particular price? correct?

im still confused...about stop and limit orders..lmao.

Answer 1

There sure is a big difference...

There are SELL stop orders and stop limit orders, and there are BUY limit orders. (There are also a multitude of other types of orders, like trailing stops, conditional order, one cancels the other (OCO), one triggers the other (OTO)), but for simplicity we'll just stick to the above.

If you set a SELL stop limit order at $10, then you're saying that if the stock drops below $10, then sell (but I want to get at least $10). If the stock gaps down, you may not be able to sell, if it falls thru your limit order of 10.

If you put a stop order to sell, and the price drops below 10 it will sell, but you may not necessarily get 10 for it, you may only get 9, or 8, or 7 depending on the spreads and how many people are buying.

A BUY limit works in reverse. You want to buy the stock, say that is now trading at $10, but you only want to pay $9.50. You put a buy limit at 9.50 and if the stock comes down at 9.50 you may or may not get it, depending on how may market orders there are at $9.50.
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Answer 2

A limit order is one where you set the price limit you want to sell or buy at. If you don't set this it will just sell or buy freely with the market, you loose some control over the price. Say you want to buy stock of a company but you don't want to pay too much. The market is fluctuating between $59 and $60 a share. You can place a limit order to buy for $59 so that when it's in the market it will cost you no more than $59. A stop order is one that does not become active until a certian price is reached. Once that price point is reach the order becomes active. Say you own shares of a company and if the price goes above a certian price you want to sell and take the profit. You bought at $59 and the price goes up to $65. To protect your profit you can set a stop order for $63 dollars. If the price goes up you still hold on to the stock. If the price goes down to $63 the stop order is trigger and it becomes a market order. The system automatically sells the stock on the open market to protect your profit. A stop limit order is a combination of a stop and limit order. Like a stop order the trade will not be placed until a certian price is reached. But instead of a market order, it's a limit order. In the last example say you set the stop order to a limit of $63. When the stock hits $63 the order is activated but the trade will only accept a minimum $63 sell prices. These can be tricky because if the price has gone down it may go below your limit price and no buyer will take your stock.

Answer 3

There is a big difference. A limit order is used when you want to buy a stock at a particular price or better. It sets a limit on the amount you are willing to pay.

A stop order is used when you own a stock that you wish to sell if the price drops below a certain price. I suppose it could also be used on a short sale also. I do not know for certain, but I do not see why not. There are actually two major kinds of stop orders. 1. a regular stop order that says to sell if the price of the stock drops to a certain price say for example $35.85 (Do not ever put in a stop at a major level as $35.00 for example because there might be a lot of other stop orders at such a price and the market maker might drop the price to that level to clean out the stops). 2. a trailing stop order that is set at a certain level below the high price of the stock. As the stock advances in price so does the stop. It can be set at either a fixed amount for a percentage amount. Maybe even other ways that I am not familiar with. For example 17% below the high, or maybe $ 5.31 below the high. Again avoid major amounts such as 10% or $5.00.

Answer 4

Ok, here's the scoop.

CROX is at $90. I have a limit order to sell at $92. If it gets to $92 or higher, I'll get my order filled. That's one of the most common uses for a limit order, to sell a stock/option at a price you designate.


Now, on a stop order, there are two types, stop loss (profit protection) orders and stop limit orders.

On CROX, I have a stop order for $84. If the stock drops to $84 or below, an order will go through at that time to sell my stock immediately at the market (bid) price, whether it was $84 or $83.95, or lower.

Now, if instead I had a stop limit order (another alternative), for $84 and the stock was dropping say to $84.10, then suddenly jumped down to $83.80, my order would go in, but instead of selling immediately at market (to protect and get rid of my position), my order would then be a limit order for $84 (meaning I would only sell if the bid was $84 or more). However, since the stock is now at $83.80, my order would just sit there while the stock continued to slide. On a big drop, I could get seriously burned. Only if/when the bid got back up to $84, would I "finally" get out of the position if I used a stop limit order. Make sense?

There are other types of orders too you can use (buy stops, trailing stops, etc), but I wanted to answer your question first. If you have other questions, please just let me know.

Hope that helps!

Answer 5

Even I want to know the answer to this question, And I thought I understood it until the 2nd guy came in and confused me.