Stop and Limit Orders

[mik1973]

Would appreciate clarification on the following:

I understand what stops are (as in damage limitation), but would like to know if my interpretation of buy and sell stops are correct.

For example if the Dow is trading at 10500 and i wish to purchase only if a target of 10520 is hit - is this referred to as a stop buy?


Conversley if the Dow is trading at 10500 and would I like to sell at 10490 and below is this known as a stop sell?

Is it also possible to set stop positions (as in damage limitation stops)on the above- even though a position may never be taken.

As for Limit orders - are these orders that are already in the market and an instruction given to buy or sell at a nominated price to trap profits.


Hope the above makes sense-i currently use Finspreads who to the best of my knowledge do not offer the first two type of orders i have mentioned.

If i haven't used the correct terminology above i would appreciate if someone could tell me what the correct instructions are.

Cheers,
Mick

 

[frugi]

mik,

"For example if the Dow is trading at 10500 and i wish to purchase only if a target of 10520 is hit - is this referred to as a stop buy?

Conversley if the Dow is trading at 10500 and would I like to sell at 10490 and below is this known as a stop sell?"

Yes.

"Is it also possible to set stop positions (as in damage limitation stops)on the above- even though a position may never be taken."

Not with spread bet firms as far as I know, but you can do this with futures through a broker like Interactive Brokers. You can configure orders so that the stop loss will only become "live" if the initial stop, as above, is triggered.

"As for Limit orders - are these orders that are already in the market and an instruction given to buy or sell at a nominated price to trap profits."

A limit order is simply an order to buy at a price lower than current or sell at a price higher than current. You can use a limit to enter or exit a position.

 

[mik1973]

Thanks for clarifying those points Frugi.

Mick

 

[dc2000]

Hi Mik
I havn't used finspreads but here is my understanding of there orders

A limit Buy or Sell order can be placed to open a position or to close a position for a profit, when you set the limit order you are able to specify a stoploss for that order.

A stop sell or stop buy is used to close an open position these can be moved once a position is in profit to effectively lock in profit without closing should the position turn on you this will still allow a profit.

An OCO order direct access only at the moment allows you to set stoploss and limit order in one go and if the stop is trigered the limit is canceled.