Everyone Shanghai Where you're trading and today we're going to go over what a stop order is. A stop order is an order type that requires you to specify a price just like a limit order except when your stop is triggered, it turns into a market order and is executed at the next available price which could be above or below your stop price depending on the price action. whereas with a limit order, you would only get filled at your limit price or better. So since stop orders are triggered in the market orders, you don't have much control on what you get in or out at.

Now stops are most commonly used as a protective order versus a long or short position. So say you were along a thousand shares of the queues here and they're currently trading at One Forty Forty three and say you wanted to get out if they traded a down below D whap which is currently at One Forty Twenty-three So you would set a sell stop order for a thousand shares at One Forty Twenty three and if prices went down to that level, it would trigger your stop and you would close your position. The same goes for if you're short, you can place a buy stop. So say if we are short here at one Forty forty and we wanted to get out, if it went above here at One Forty Fifty two, we could place a buy stop at that level and if prices went up to it, they would trigger it and really close our short position.

So that's how you can use a stop to protect position but they can also be used to enter a position. Typically they are used on breakout setups where a trader is looking to enter a trade when prices break above or below a key resistance or support level. So let's say you wanted to buy some cues here if they broke out above one forty fifty two. What you do is you would place a buy stop just above that like one forty fifty three and if prices came and broke above there and set off your stop order and you advise ere is that whatever the next market price was since it since they do turn into market orders you wouldn't have any control and the prices you got and that's just kind of the the risk you take when you place a buy stop or a sell stop order.

So they can be useful but you have to be careful using them in stocks especially with that have big spreads or thinly traded because when your stop is triggered into a market or you could lose or you know you could close your position 10 15 cents or even more before your stop price and although that's not very common it's still something you want to try and avoid. Now for stock that like that you could look at using something like a stop limit order which is something I'll go over in another video. but all right well that's it for stop orders everyone. if you have any questions, leave us a message in the comments below.

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