Open Question
pickrs
TRailing stops- need some clarification
let's say stock XYZ is trading @ $10. I put a trailing stop (sell) for 2 points.
Does it mean that if stock goes down to $8, it will be sold, correct? And if the
stock goes up to $13? it is only sold unless price goes down to $11, correct?
Now, let's say stock that I bought for $ 10, goes up to $20. I still have the $
2points trailing stop (When drops to $ 18, it will sell). If I decide to sell at
$ 20, I would need to cancel my trailing stop, and place a limit order (or other
one). Am i correct on my thinking? I went to investopedia, but I was not 100%
sure I understood, therefore I came for the experts. Thank you, Leo
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I can't tell how many questions you are asking here. Let me say though - if your
stop loss is at $8 the stock DOES NOT have to trade there for the stop to get
executed. Most brokers use BID to trigger the stop loss. So you could get bid
$8, your stop gets executed at $8.10 (or whatever), and the stock never sees $8
- it happens. Use conditional orders (i.e., if "last trade = $8 then
sell")
Answered by Peter near Matanzas Inlet
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Normally, you would buy the stock at $10 and specify a STOP price to sell at.
Let's say you specify $8 as your stop. When the stock trades at $8 or lower, it
triggers a market order and your order gets filled. However, it might be filled
at a price other than $8. So, what happens if it has bad earnings and opens the
next day at $6? It triggers a market order and you get filled at $6 or
therabouts. If the stock goes up, the stop stays at $8, so will need to move the
stop up if the stock rises. You can also set a %stop, but it works the same way.
When that price is hit, it becomes a market order. Some brokers also allow more
complex orders, but I don't think you're ready yet for those.
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Yup.
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Go do some more homework!
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