How to Buy a Stock and Set It So It Automatically Sells After a Price Drop

Stop orders and stop-limit orders minimize your losses and protect your gains.

Stop orders and stop-limit orders minimize your losses and protect your gains.

Stockbrokers offer various types of sell orders that let you customize how you sell stock after you buy shares. Two of these -- stop orders and stop-limit orders -- act like a safety net. They instruct your broker to automatically sell a stock when it falls to or below a specified price, called a stop price. When you place a stop order and the stock hits your stop price, your shares sell for the best available market price. When you place a stop-limit order and the market declines to your stop price, your stock sells for at least a minimum price that you designate.

Log in to your brokerage account and click the “Buy/Sell” command. Type the ticker symbol of capital letters of your desired stock and click “Buy.” (This is the choice most brokerage sites offer; some differ in exact wording.)

Input your desired number of shares in the “Quantity” box.

Select either “Market” or “Limit” as the type of buy order. A market order buys your shares at the lowest available price. If you choose a limit order, input a maximum price you’re willing to pay in the “Limit Price” box. This differs from the limit price used to sell stock.

Select an option in the “Duration” box, such as “Day Order” or “Good-til-Cancelled.” These tell your broker how long it should try to complete your order. A day order lasts until the end of the trading day. A good-til-cancelled order remains open until it fills.

Click “Confirm” to send your order. For example assume you choose a good-til-cancelled market order to buy 10 shares. Assume your order fills immediately for $20 per share.

Click “Positions” or a similar menu after you buy your shares to view your stocks. Click the stock you bought and click “Sell.”

Select either “Stop” or “Stop-Limit” as the type of sell order. Regardless of your selection, input a stop price that’s below the current market price in the “Stop Trigger” box. This is the price that triggers your sell order. If you choose a stop-limit order, also input your desired minimum selling price in the “Limit Price” box. In this example, assume you select a stop-limit order with a $17 stop price and a $16.50 limit price. When the stock falls to or below $17, your shares automatically sell for at least $16.50. If you instead choose a stop order with a $17 stop price, your stock sells for the best available price when the stock declines to $17.

Select the number of shares you want to sell in the “Quantity” box. In this example, assume you choose all 10 shares.

Choose one of the options in the “Duration” box. These are the same as those in a buy order. In this example, assume you select “Good-til-Cancelled.”

Click “Confirm” to submit your stop order.

Tip

  • If you use a stop order and the market falls past your stop price, your shares might sell for much less than your stop price. If you place a stop-limit order and the market dips below your limit price, your shares might not sell.
 

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