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A stop-limit order automatically liquidates a stock at a specific price. A stop-limit order is designed to either protect a profit or to minimize a loss. Unlike a simple stop order, which liquidates a position at the best price possible, a stop-limit order liquidates a position at a specific price (or better). This can pose a risk to the investor in a fast-moving market, where it is possible for a stop-limit order to be passed over with no one willing to sell at the specified price. A trailing stop-limit order can be an excellent risk management tool. A trailing stop-limit order placed, say, 50 cents below a stock's highest trade limits an investor's loss to 50 cents per share, but if a stock's price rises, the trailing stop-limit order rises along with the stock, locking in a profit. |
