I am trying to understand what is the difference between a stop order, and a limit order for stock purchase. If I am aiming to purchase a stock when it hits $x price, do I use stop, or limit order? - Seedly
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Raymond Chua

Asked on 11 Aug 2020

I am trying to understand what is the difference between a stop order, and a limit order for stock purchase. If I am aiming to purchase a stock when it hits $x price, do I use stop, or limit order?

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X_Y

Level 5. Genius

Answered on 11 Aug 2020

I guess you know what is a Market Order, i.e entering at the current market price.

When you are long a stock (betting the price to go up), you use a Buy Stop Order to enter at a price HIGHER than the current market price. This strategy is for people doing an upside breakout strategy. They camp at a level to enter when price bursts upward. On the other hand, you use a Buy Limit Order to enter at a price LOWER than the current market price. This strategy is for people waiting for a price pullback to a lower level where they think it will resume its upward move.

When you are short a stock (betting the price to go down), you use a Sell Stop Order to enter at a price LOWER than the current market price. This strategy is for people doing an downside breakout strategy. They camp at a level to enter when price bursts downward. On the other hand, you use a Sell Limit Order to enter at a price HIGHER than the current market price. This strategy is for people waiting for a price recovery to a higher level where they think it will resume its downward move.

Hope it helps.

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Raymond Chua
Raymond Chua

12 Aug 2020

Thanks. Yes, looks like Stop order is what I need. Instead of setting price alerts, I would like to pre-set in the system to buy when the stock hits the price signal (ie breakout), and then setting trailing stop loss. Been exploring Saxo, IG, and others. Any idea which is a better platform for this purpose?
X_Y

12 Aug 2020

I cannot give you a fair comparison as I only use CMC Markets. But they should have similar functions. Hook up with the Sales Representative and inquire. They will be more than happy to help.
Thank You!
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Jason

Level 6. Master

Answered on 11 Aug 2020

Hi Raymond,

You will be looking to use limit order and choose a specific price, which instruct your broker to buy the selected stock when the price hits the price which you set.

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Thank You!
Can you clarify
I wonder if
This is so helpful ūüĎć
What about
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