A stop-limit-on-quote order is essentially a stop-loss order combined with a limit order. It allows an investor to sell a stock at their lowest desired price if it declines, without risking a market panic. When a commodity reaches a trigger price, its price or the terms under which it is sold are altered; a price at which certain consequences occur. Regrettably, the trigger price was set so high that a rebate was virtually impossible. Many brokers now include the term "stop on quote" in their order types to indicate that the stop order will only be executed if a genuine quoted price in the market is satisfied.
Stop-loss and stop-limit orders give traders more control over their trades. When a certain price is reached, a stop-loss order initiates a market order. When a specified price is reached, a stop-limit order is triggered, and a limit order is triggered. A stop-order and a stop-limit order both execute only when a target price is met, whereas a typical market order executes instantly regardless of the underlying security's price.
These orders are quite common in the stock market, particularly in leveraged trading and currency markets. Stop-loss and stop-limit orders both mitigate risk in turbulent markets where large price fluctuations can occur quickly. Both orders are handy for risk-averse ordinary investors who want to lock in a portion of a deal.
TAKEAWAYS IMPORTANT
- Traders employ both types of orders to reduce downside risk and collect upside profits when specified price goals are hit.
- When triggered, stop-loss orders execute a market order, and contract execution is guaranteed if the stop-loss price is met.
- When the initial stop-loss order is activated, stop-limit orders execute a limit order, giving investors additional control over the execution price.
- Because the contract may execute below the stop-loss price, the price of a stop-loss order is not guaranteed.
- If the limit order price is not triggered, the full execution of a stop-limit order is not assured.