Limit or Stop selling - what's the difference?

Brie

So my share account has the option online to sell using a Limit or a Stop setting.

The account shows these as the explanations but frankly I'm not sure what the difference would actually mean.   What I would like to do is set a price to sell a certain volume of shares.  So sell 1k shares at £4 for instance.  

Limit - Buy or sell at a price you set, which can either be higher or lower than the current market price. We’ll place your order automatically when the price you chose is reached or exceeded. 

Stop - Buy or sell shares but only when a stop price you specify is reached or passed. You can also add an optional limit price, which can protect you further. We monitor your order automatically until the order expires. 

InvesterJones

A stop order is like a trigger - once a price has been met then the instruction to buy/sell at the best market price is followed - which means the price might not be the same as the trigger point, it could be better or worse, but the trade will always go ahead.

A limit order is where you will only buy/sell when you can get a price at the limit price or better - so even when triggered it might not be filled if the price changes or there aren't enough trades available at the limit price. So the (full) trade does not always go ahead, but if it does, it's for your price or better. (See variants of fill or kill where it only goes ahead if all of the order can be met etc.)

Brie

InvesterJones said:

A stop order is like a trigger - once a price has been met then the instruction to buy/sell at the best market price is followed - which means the price might not be the same as the trigger point, it could be better or worse, but the trade will always go ahead.

A limit order is where you will only buy/sell when you can get a price at the limit price or better - so even when triggered it might not be filled if the price changes or there aren't enough trades available at the limit price. So the (full) trade does not always go ahead, but if it does, it's for your price or better. (See variants of fill or kill where it only goes ahead if all of the order can be met etc.)

So a limit order is a safer option if I want the best price?  i.e. it will trigger at £4 but I might get £4.02 but would never get £3.98?

InvesterJones

Brie said:

InvesterJones said:

A stop order is like a trigger - once a price has been met then the instruction to buy/sell at the best market price is followed - which means the price might not be the same as the trigger point, it could be better or worse, but the trade will always go ahead.

A limit order is where you will only buy/sell when you can get a price at the limit price or better - so even when triggered it might not be filled if the price changes or there aren't enough trades available at the limit price. So the (full) trade does not always go ahead, but if it does, it's for your price or better. (See variants of fill or kill where it only goes ahead if all of the order can be met etc.)

So a limit order is a safer option if I want the best price?  i.e. it will trigger at £4 but I might get £4.02 but would never get £3.98?

Correct, if you have to get a certain price (and don't have any time concerns) then use limit order. A stop order is more about making sure you get out of/into a trade before it gets too much worse.

gravel_2

Brie said:

InvesterJones said:

A stop order is like a trigger - once a price has been met then the instruction to buy/sell at the best market price is followed - which means the price might not be the same as the trigger point, it could be better or worse, but the trade will always go ahead.

A limit order is where you will only buy/sell when you can get a price at the limit price or better - so even when triggered it might not be filled if the price changes or there aren't enough trades available at the limit price. So the (full) trade does not always go ahead, but if it does, it's for your price or better. (See variants of fill or kill where it only goes ahead if all of the order can be met etc.)

So a limit order is a safer option if I want the best price?  i.e. it will trigger at £4 but I might get £4.02 but would never get £3.98?

It depends if £4 is above or below the current price.

If above you have to use limit and you will get a minimum of £4 per.
If below you have to use stop or stop limit.
Stop converts to a market order when triggered so will sell at whatever the market price is after the trigger is met. Stop limit is a hybrid whereby the price triggers the stop order but the limit decides how low a price you will accept on triggered sales. For example stop £4, limit £3.90 creates a trigger at £4 and a 10p band below the trigger that you are willing to sell at once the stop is triggered.

You can basically reverse the above for buy orders.

Brie

Thanks @InvesterJones

gravel_2 said:

It depends if £4 is above or below the current price.

Yes - the price has been inching up and I get bored checking it daily so have missed a couple of opportunities when I might have sold.  So will be happy to get a nice price for one tranche of shares and will set another for a higher price maybe in a week or two if the market continues to behave as I want it too.