Sell Stop Limit Orders - How to use?

[Newventurer]

Below is Schwab's explanation of Stop Limit Orders. Once you set the Stop Price what strategies do you employ to set a Limit Price? What are the pro's and cons?

Thanks!

Schwab Explanation

Stop Limit Order

A Stop Limit Order is an order which becomes a Limit Order once the security trades at the designated stop price. A Stop Limit Order instructs a broker to buy or sell at a specific price or better, but only after a given Stop price has been reached or passed. It is a combination of a Stop Order and a Limit Order.

To enter a Sell Stop Limit Order, you must enter a Stop price below the current security price and a Limit price less than or equal to the Stop price. If the security trades at or below the Stop price, the Limit Order to sell the security you entered will be activated.

A Stop Limit Order does not guarantee an execution.

NOTE: Schwab will not trigger your stop or stop limit orders based upon odd-lot transactions, or any other transactions excluded from the consolidated last sale price calculations.

 

[Lakewood90712]

Just remember, if the sky is falling, it can gap down on open, and drop well below your limit price before being executed.

A lot of the older talking heads used to recommend not trading in the first half hour , buy or sell. Don't know if this is still valid advise.

 

[MRG]

Any event that creates a short term drop kicks you out. Not any experience I want to repeat.

Sent from my SAMSUNG-SM-G920A using Early Retirement Forum mobile app

 

[Senator]

Any event that creates a short term drop kicks you out. Not any experience I want to repeat.

This happens a LOT. Use a limit order when you sell, just to protect you against a bad sell. Otherwise make your own decisions when you are ready to sell.

Put in a stop gain. A sell if the stock gains 10% or so. You will be better served with that, than a stop loss.

 

[LOL!]

I don't even think of using these things.

First, I do use alerts, so if the price of something either goes above or below a specified price, then my phone tells me. These are great so that if I am distracted, it undistracts me. Then if needed, I can submit an order.

Second, I am using relatively broad market ETFs and not sector ETFs and not single stocks. If something is dropping big time, then I am buying it. I am not interested at all in downside protection. For the downside, I just have some assets in bond funds because I know that broad market index funds will eventually recover within my lifetime.

 

[MRG]

This happens a LOT. Use a limit order when you sell, just to protect you against a bad sell. Otherwise make your own decisions when you are ready to sell.

Put in a stop gain. A sell if the stock gains 10% or so. You will be better served with that, than a stop loss.

I never set them. Well I never set them now! Didn't get bit too bad, enough to learn.

My use of limits is exactly as you describe. Limits on buys and profitable sales. No sense in selling into panic.

 

[ERD50]

Pros: NONE
Cons: Already listed by others

There have been some posts in the past from people who have been stopped out, and saw a permanent loss from a temporary blip. I'm a 'never say never' guy, but this is my exception - NEVER use a stop order. A stop limit order is just a variant, with similar problems.

If you mainly invest in broad based index funds, the volatility of an individual holding is of little concern. Just go for a walk instead.

-ERD50