When you place a Stop Order, you are setting the price below the current trading price such that if that price is hit, an order to sell will occur at your broker. If just set as a stop order, then the price at which it sells after the stop is triggered, will be a “market” price. That means whatever the market might be trading at, at that time. An alternative is to set a stop limit order. Where the price for the stop order is still set at a certain trigger price point. But the actual order then placed to sell can be set to a certain “limit” price point. That means it will only get filled if the symbol hits that price. The only danger with stop limit is that you may not get filled if the symbol won’t sell at that price. This can be especially true on gap downs, say at the open of a market. If you have set just a stop order, then the fill of that sale could be a price point much lower then the trigger of the Stop. But the fill or sale will occur. Whereas if a stop limit order had been set, the price may have gapped much farther down then the limit price you were willing to sell it at. And thus your order never does get filled unless the price climbs back up to hit the set stop limit price.
The challenge in setting your own stop orders is that:
- You would have to determine what price point to set it at each day. That means you are going to spend alot of time trying to learn a bunch of technical analysis that in the end can not work the best for you. Plus you will have to invest a lot of time each day to charting and figuring out the next day’s stop order price as it shouldn’t be left the same each day.
- If you choose a trailing stop approach, then your challenges will be:
a) A percentage trailing stop is an inadequate and problematic way to set a stop. To learn more on Why, click here.
- b) A fixed amount that trails – well, you then have to figure out what that should be. And again, not changing it daily is a mistake as risk value fluctuates and you need a value that can properly adjust.
If you are using SmartStops as your trailing stop approach then you have the best of all worlds. As we offer smart technical analysis built on four decades of real market experience and continues to evolve. And your stop value will adjust daily for the next day’s market. It is calculated after the market is closed.
Using Brokerlink (available for only certain brokers) you can easily set the SmartStops across your entire portfolio in just seconds! Even faster then doing this manually on your broker’s platform. With SmartStops.net, the Stop trigger price can be either the Aggressive price point (tighter to the trading range) or the more Conservative (will give more room for price to fluctuate) price point. That would be the price at which a stop order would be triggered. It would be triggered to sell at “market price” by default, unless you change it at your broker to set the actual limit price which could be the same as the trigger or different. To learn more about the differences between Aggressive and Conservative SmartStops click here.