Etrade Stop On Quote Vs Stop Limit On Quote
When it comes to trading on Etrade, it’s important to understand the different types of orders available to you. Two popular options are Stop On Quote and Stop Limit On Quote orders. In this article, we’ll break down the differences between these two order types and when you might want to use them.
Stop On Quote Orders
Stop On Quote orders are triggered when the stock’s price hits a specified stop price. Once the stop price is reached, the order is executed at the next available market price. These orders are typically used to limit losses or protect profits.
For example, let’s say you own shares of XYZ Company and the current market price is $50 per share. You want to limit your potential losses, so you set a Stop On Quote order with a stop price of $45 per share. If the stock price drops to $45 or below, your order will be triggered and executed at the next available market price.
Stop Limit On Quote Orders
Stop Limit On Quote orders are similar to Stop On Quote orders, but they include an additional limit price. When the stop price is reached, the order becomes a limit order and is executed at the specified limit price or better. These orders are typically used to protect profits while also ensuring a minimum sale price.
For example, let’s say you own shares of XYZ Company and the current market price is $50 per share. You want to protect your profits, so you set a Stop Limit On Quote order with a stop price of $55 per share and a limit price of $54 per share. If the stock price rises to $55 or above, your order will be triggered and become a limit order with a minimum sale price of $54 per share.
When to Use Each Order Type
The decision to use a Stop On Quote order versus a Stop Limit On Quote order ultimately depends on your trading strategy and goals. Here are some general guidelines:
- Stop On Quote orders are typically used to limit losses or protect profits without specifying a minimum sale price.
- Stop Limit On Quote orders are typically used to protect profits while also ensuring a minimum sale price.
- Stop Limit On Quote orders may be more appropriate for volatile stocks or during times of high market volatility.
- Stop On Quote orders may be more appropriate for less volatile stocks or during times of low market volatility.
Conclusion
Understanding the differences between Stop On Quote and Stop Limit On Quote orders is crucial for any trader on Etrade. By utilizing these orders effectively, you can limit losses, protect profits, and improve your overall trading strategy.