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.
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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.

Step 1

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.)

Step 2

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

Step 3

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.

Step 4

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.

Step 5

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.

Step 6

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

Step 7

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.

Step 8

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

Step 9

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.”

Step 10

Click “Confirm” to submit your stop order.

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