This type of order should be placed above the current market price of a stock. A buy stop indicates that you wish to purchase a stock once the price rises to a certain price level. That price level is termed the activation price. For a Nasdaq stock, the order will activate when the Ask hits or rises above the activation price. For a listed stock, the order will activate when the stock trades at or above the activation price. Rules specific to each exchange determine if the order is activated either by a trade at the activation price, or the quotation of asset at the stop price. After a stop order has been activated, it is subject to the same rules and conditions as a market order. Stop orders may execute at a significantly different price than the activation price.

A buy stop market order is entered as follows:

1. Choose Buy.

2. Enter the number of shares in the QUANTITY field.

3. Specify your activation price in the PRICE field.

4. Select STOP MARKET from the order type pull-down menu.

5. Choose the expiration (Day or GTC).

6. Do not enter anything in the STOP LIMIT field on the far right.

Buy Stop Limit Order

This type of order should be placed above the current market price of a stock. A buy stop indicates that you wish to purchase a stock once the price rises to a certain price level. That price level is termed the activation price. You decide the highest price that you are willing to pay for the stock if the order is activated. That price level is termed the stop limit price. For a Nasdaq stock, the order will activate when the Ask hits or rises above the activation price. For a listed stock, the order will generally activate when the stock trades at or above the activation price. Rules specific to each exchange, however, determine if the order is activated either by a trade at the activation price, or the quote of the asset at the activation price.

The activation price is the price at which the Ask price, or last trade, must meet or rise above before the order is activated. Once activated, the order becomes a limit order to buy at your limit price.

The limit price that you enter on a buy stop limit should generally be placed above the activation price. This is to prevent the stock from trading through your limit price once the order is activated. If the limit and activation price are the same, you may not receive an execution in a rising market. Like all price limit orders, however, a stop limit order carries the risk of missing the market altogether because it may never reach or surpass the specific limit price. In a fast moving market, it may be impossible to execute an order at the limit price, so you may not have the protection you sought.

A buy stop limit order is entered as follows:

1. Choose Buy.

2. Enter the number of shares in the QUANTITY field.

3. Specify your limit price in the PRICE field.

4. Select STOP LIMIT from the order type pull-down menu.

5. Choose the expiration (Day or GTC).

6. Specify your activation price in the ACTIVATION PRICE field on the far right.

Example:

You enter a buy stop limit on ABCD with the activation and limit price both at 123. ABCD is currently trading at 120. A week later, the price of ABCD begins rising and the Ask eventually hits 123, so your order is activated. It now becomes a limit order to buy at 123. However, the price of ABCD is rising so quickly that once your order is activated and routed to the market as a limit order to buy at 123, the price of ABCD is now 123.50. Your limit order is no longer marketable and will not be executed unless the price of ABCD drops to or below your limit price.

If you had placed the limit portion of your order at 123.50 or even 124, you would have increased the possibility that your order would be executed in a quickly rising market. How high you place the limit with respect to the activation price depends upon the maximum price you are willing to accept on an execution once the order is activated.

Sell Stop Limit Order

A stop limit order is generally used to limit a loss on a long stock position in a falling market or to protect against an upside risk if you have sold a stock short. The order will not be activated unless the activation price is triggered either by a quotation of the stock at the activation price or better, or by the stock trading at that specific price or better. Rules specific to each exchange, however, determine if the order is activated either by a trade at the activation price, or the quote of the asset at the activation price.

The activation price is the price at which the Ask price, or last trade, must meet or rise above before the order is activated. Once activated, the order becomes a limit order to buy at your limit price. Stop limit orders must include an expiration, either GTC (good-till-cancelled) or Day. Like all price limit orders, however, a stop limit order carries the risk of missing the market altogether because it may never reach or surpass the specific limit price. In a fast moving market, it may be impossible to execute an order at the limit price, so you may not have the protection you sought.

A sell stop limit order is entered as follows:

1. Choose Sell.

2. Enter the number of shares in the QUANTITY field.

3. Specify your limit price in the PRICE field.

4. Select STOP LIMIT from the order type pull-down menu.

5. Choose the expiration (Day or GTC).

6. Specify your activation price in the ACTIVATION PRICE field on the far right.

Example:

You enter a sell stop limit on ABCD with activation and limit price both at 123. ABCD is currently trading at 128. A week later, the price of ABCD begins falling and the bid eventually hits 123, so your order is activated. It now becomes a limit order to sell at 123. However, the price of ABCD is falling so quickly that once your order is activated and routed to the market as a limit order to sell at 123, the price of ABCD is now 122.50. Your limit order is no longer marketable and will not be executed unless the price of ABCD rises to or above your limit price.

If you had placed the limit portion of your order at 122.50 or even 122, you would have increased the possibility that your order would be executed in a falling market. How low you place the limit with respect to the activation price depends upon the minimum price you are willing to accept on an execution once the order is activated.

Sell Stop Market

Generally used to limit losses on long stock positions in falling markets. This type of order is placed BELOW the current market price of the stock. Activation prices for stop orders must be entered in decimals. There is no guarantee that the execution price will be equal to or near the activation price. This is more likely to occur in a fast moving market. Example:

You own 100 shares of ABCD, which is currently trading at $100 per share. You would like to sell ABCD as soon as the price drops to 95 (the activation price). You feel that the price at which your order is executed is not as important as the execution itself. Your order will be activated when the bid price reaches or goes below 95 (the activation price). At this point the order becomes a market order to sell 100 shares of ABCD.

You can choose a Day or GTC expiration for this order but it cannot participate in extended-hours trading sessions.

Stop Parameters

Trailing Stops are entered with a Stop Parameter that creates a moving or "trailing" activation price. The Stop Parameter can be entered in points or by percentage. If using points, the trail amount must be a minimum of one cent and no greater than the current bid if a sell or ask if a buy. If using a percentage, the trail amount must be a whole number between 1 and 99. The Stop Parameter should reflect your risk-to-reward comfort level.

Trailing Stops (Sell)

Sell Trailing Stops are used in long stock positions to maximize and protect profit in rising markets and limit losses in falling markets. To calculate your activation price, take the bid and subtract the stop parameter. If the bid moves up, the activation price is recalculated or "trails" to reflect the new value. If the bid drops to an amount equal to or less than the previously recalculated activation price, the order is activated and becomes a Market Order. A sell Trailing Stop allows you to enter a stop order where the activation price changes with the market.

Trailing Stops (Buy)

Buy Trailing Stops are used in short stock positions to maximize and protect profits when the market is falling, or to limit losses if the market is rising. For buy Trailing Stops the activation price is calculated by taking the ask price and adding the stop parameter. If the ask goes down, the activation price is recalculated. If the ask increases and is equal to or greater than the previously recalculated activation price, the order is activated and becomes a Market order.

One Final Note About Trailing Stops

You do not need to enter any price information when using Trailing Stops. You may enter the Stop Parameter as either a percentage or point amount. The Stop Parameter reflects your risk-to-reward comfort level.

As with any Stop order, there is no guarantee that the execution price will be equal to or near the activation price. Execution at a price different than the activation price is more likely to occur in a fast moving market.

Please Note:
When placing a Stop order, please keep in mind that activation prices differ for each exchange. Stop orders placed for NYSE securities are activated by the last traded price. Sell Stop orders for Nasdaq securities are activated by the bid price and buy Stop orders by the ask price.

Trailing stops may not be placed on OTCBB securities, mutual funds, or options.