Stop Order

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A stop order, also called a stop-loss order, is an order to trade a security when it has reached above or below a specified price. When the price is met, the stop order is triggered and changed to a market order.

• In a buy stop order, a stop price is set above the current market price. It could be used by investors in many scenarios. For example, investor A has observed an increase in XYZ stock and believes it’s a good trading opportunity. However, she is not sure if this is a long-term upward trend. Therefore, she places a buy stop order with a stop price of $30 when XYZ stock is trading at $27. The order will only be filled at the market price if XYZ stock rises to $30 or above.
• A buy stop order could also be used by short sellers to stop potential losses. For example, investor B opened a short position in XYZ stock at a price of $27, expecting the stock price to fall. He could place a buy stop order of XYZ stock with a stop price above $27 to limit his losses from unexpected price increase.

• In a sell stop order, a stop price is set below the current market price. It could be used by investors to stop losses or to lock in profits. For example, investor C bought XYZ stock at $22. Investor D bought XYZ stock at $26. They both place a sell stop order with a stop price of $24 when XYZ stock is trading at $27. For investor C, he wants to lock in a profit of about $2 per share. However, for investor D, the purpose is to stop losses at about $2 per share.

‌To sum up:

A stop order is triggered at the stop price and filled as a market order. The stop price is set above (buy stop) or below (sell stop) the market price.

With a stop order, investors can seize trading opportunities without having to monitor the market closely. Investors can use stop orders to lock in profits or stop losses. Please note: it is possible that a stop order may fill at a price much different from the stop price, especially in a volatile market. If you want to limit your trading price, a stop order may not be the best choice.

Tips:

1. On Webull, we only support placing stop orders during market hours.
2. You can choose a Day order if you only want your order to last for a day. If you want your order to last longer, use a Good ‘Till Canceled order, which will last for 60 days (including weekends and holidays).

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