Stop Price

A stop price gives you more flexibility when placing a trade, with a stop price, generally speaking, you won’t need to keep checking the price of your assets until you want to place an order. An order will then only be placed on the market if the asset price reaches or exceeds your stop price.

Stop Order

A stop order is an order to buy or sell a share once the price of that share reaches a specific price, known as the stop price.

When the stock reaches the stop price, the stop order becomes a market order. The market order is executed at the best currently available price. In general, stop orders are used to trigger the purchase of a share in case the price reaches or exceeds the stop price; or activate the sale of a share in case the price reaches or falls below the stop price.

It is important to mention that not all stocks accept market orders during extended hours. If the market is closed, the order may not be filled or queued until the time the market opens again the next day.

Buy Stop Order

With a buy stop order, you can set a stop price above the current price of the stock. If the stock rises to its stop price, your buy order will become a market buy order.

Example:

HAPIS is currently trading at $10 per share. You want to wait to buy HAPIS until it reaches $15 per share because you think it will continue to increase in price much more than, but only after it reaches $15. So, you place a buy stop order with a stop price of $15.

  • If HAPIS rises to $15 or more, your stop buy order becomes a market buy order. Then, HAPIS is bought at the best available price at the moment.

  • If HAPIS remains below $15, the buy market order is not triggered and the shares are not bought.

(This example is shown for illustrative purposes only. In general, understanding order types can help you manage risk and execution speed. However, you can never completely eliminate market and investment risks, it’s usually better to choose an order type based on your investment goals and objectives.)

Sell Stop Order

With a sell stop order, you can set a stop price below the current price of the stock. If the stock falls to the stop price, your sell order becomes a market sell order. This type of order is often referred to as a “stop loss” order as they are used to limiting losses or lock in gains.

Example:

You bought HAPIS some time ago at $10. It is currently trading at $20 per share ($10 return). Your goal is to get at least $5 per share in case the price drops. So, you place a sell stop order with a stop price of $16.50. If HAPIS changes trend, it starts to fall below the stop price of $16.50 it becomes a market sell order.

  • If HAPIS falls to $16.50 or less, your sell stop order becomes a market sell order. HAPIS is then sold at the best available price at the moment.

  • If HAPIS remains above $16.50, the sell market order is not triggered and the shares are not sold.

(This example is shown for illustrative purposes only. In general, understanding order types can help you manage risk and execution speed. However, you can never completely eliminate market and investment risks, it’s usually better to choose an order type based on your investment goals and objectives.)

Do you have any questions or comments about stop orders? Email us at contacto@imhapi.app, we are here to help you!