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Whats the difference between a stop and Limit Order

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									Whats the difference between stop and limit
orders?


Another question I get asked a lot, is if there is a difference between a stop and a
limit order.

Well. I can tell you they are both types of 'order to open'

So first, I will explain what an 'order to open' is

 

What we are talking about is setting up an agreement with the spread betting
company, so when an order hits a specific price they will open a trade for
you.

When the market price reaches your specified price the trade order is filled

But if the market doesn't actually reach the market level you specified, then it
doesn't become a live trade.


 

So lets look at what an open to order ticket actually looks like

 
 

Now if you take a look at the fifth box down, where it says 'type' there is two types of
order you can select

Stop and Limit

 

So whats the difference?

 


Limit order
 

The best way to look at Limit orders is that you are wanting to get a better price
then is currently on offer, so, if your buying but you think the market may drop
a little before it moves up, you would place a 'limit order' lower then where the
market currently is.

This way, the order will trigger at that lower level and you get a better
price.

Also if you are looking to sell and think the market may move up a little before
moving down, you would place a limit order slightly higher then where the price
currently is.

 

So if your hoping the market will move in one direction in the long term but think it
my move a little in the opposite direction in the short term, you would open a 'limit
order'

 


Stop order
 

A stop order is very similar in theory, but there is one slight difference.

The best way to think of a stop other is that you are looking for 'confirmation'. so,
say if you want to open a buy order, you would place the order slightly higher
then the current price.

You would do this when you are not 100% sure the market will move up, so you are
looking for 'confirmation' and want to see the market to start going up first before
opening your order.

Once the market starts moving up, this would trigger your stop order.

So if your buying you would place a stop order higher then the current price
and if your selling, you would place a stop order lower then the current price.

 

Thats it....

 

Thats how limit and stop orders work, easy to understand, but a little tricky to
explain
Hopefully I have explain this clearly for you.

 

Any questions, please leave a comment below and I will promise to respond asap.

Thanks

Chris(admin)

								
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