# Help me with stop/limit order

Hi, everyone. I got confused every time I see some things about stop order, limit order, and stop-limit order. Could you help me understand these solutions for following questions? 1. What does a stop order to sell at \$2 mean? When might it be used? sol’n : A stop order to sell at \$2 is a market order to sell once a price of \$2 or less is reached. It could be used to limit the losses in a long position. --> what does it mean? What does a long position have anything to do with a stop order to sell? 2. What does a limit order to sell at \$2 mean? When might it be used? sol’n : A limit order to sell at \$2 is an order to sell at a price of \$2 or higher. It can be used to lock in the gain on a long position. —> what does it mean too? 3. Explain what a stop-limit order to sell at 20.30 with a limit of 20.10 means? sol’n : This is a stop order and limit order combined. As soon as a bid or offer is placed below \$20.30, a limit sell order is created at \$20.10. The limit sell will be executed provided it can be done at a price of \$20.10 or higher.

Additionaly, with respect to a stop-limit order, by definition, the order becomes a limit order as soon as a bid/offer is made at a price equal to or less favorable than the stop price. What if a bid/offer is made at a price more favorable that the stop price?

FlyingCFA Wrote: ------------------------------------------------------- > Additionaly, with respect to a stop-limit order, > by definition, the order becomes a limit order as > soon as a bid/offer is made at a price equal to or > less favorable than the stop price. What if a > bid/offer is made at a price more favorable that > the stop price? If I put in a stop limit order at 20.30 as soon as it trades below 20.30, I have a limit order of 20.10 which means I’ll buy it for any price greater than 20.10. If immediately after it touches 20.30 a takeover bid at 30 isannounced and the stock trades at 28, you’re supposed to get 28. In the real world, you’ll probably get filled at 20.11. Gotta be careful about handing out these kinds of orders.