Difference Between Limit And Stop On Quote
When it comes to trading in the stock market, there are different types of orders that you can use to buy or sell stocks. Two of the most common types of orders are limit orders and stop on quote orders. While both of these orders are used to enter or exit a trade, they work in different ways. In this article, we will explore the difference between limit and stop on quote orders.
Limit Orders
A limit order is an order to buy or sell a stock at a specified price or better. When you place a limit order, you are telling your broker that you want to buy or sell a certain number of shares at a specific price or better. If the stock does not reach your specified price, the order will not be executed.
For example, if you want to buy 100 shares of ABC stock at $50 per share, you would place a limit order to buy at $50. If the stock price never drops to $50 or lower, your order will not be executed.
Limit orders can be used to buy or sell stocks. If you want to sell a stock, you would use a limit order to sell at a specific price or better. This means that you will not sell the stock for less than your specified price.
Stop on Quote Orders
A stop on quote order is an order to buy or sell a stock once the stock reaches a certain price. When you place a stop on quote order, you are telling your broker to execute the order once the stock reaches your specified price.
For example, if you own 100 shares of ABC stock and you want to sell if the price drops to $45 per share, you would place a stop on quote order to sell at $45. If the stock price drops to $45, your order will be executed.
Stop on quote orders are commonly used as a way to limit losses. If you own a stock and want to sell it if the price drops below a certain level, you can place a stop on quote order to sell if the stock reaches that price.
The Main Difference Between Limit And Stop On Quote Orders
The main difference between limit and stop on quote orders is that limit orders are used to enter a trade at a specific price, while stop on quote orders are used to exit a trade at a specific price.
Limit orders are used to buy or sell a stock at a specific price or better. This means that you are willing to wait until the stock reaches your specified price before you enter the trade. Stop on quote orders, on the other hand, are used to buy or sell a stock once the stock reaches a certain price. This means that you want to exit the trade if the stock reaches your specified price.
Conclusion
In summary, limit and stop on quote orders are two of the most common types of orders used in the stock market. While both orders are used to enter or exit a trade, they work in different ways. A limit order is used to enter a trade at a specific price, while a stop on quote order is used to exit a trade at a specific price. Understanding the difference between these two types of orders can help you make more informed trading decisions.