Recent Examples of stop order from the Web
According to the reports, Best Buy has stopped ordering new handsets from Huawei and will no longer sell its products over the coming weeks.
But partway through, legislators failed to appropriate money for the fiscal year beginning July 2015 and the state issued a stop order on the work, one of more than 200 projects affected statewide.
Almost a month later, several thousand dollars were withdrawn from the account despite the bank having put a stop order on it, Austrac also alleged.
These example sentences are selected automatically from various online news sources to reflect current usage of the word 'stop order.' Views expressed in the examples do not represent the opinion of Merriam-Webster or its editors. Send us feedback.
Financial Definition of STOP ORDER
What It Is
How It Works
For example, let's assume that you own 100 shares of Company XYZ stock, for which you have paid $10 per share. You are expecting the stock to hit $12 sometime in the next month, but you do not want to take a huge loss if the market turns the other way.
You direct your broker to set a stop order at $8.50. If the stock goes up, you will realize all of the benefits. If the stock goes down and touches $8.50, your broker will automatically place a market order to sell your shares.
It is important to note that when the stop order is triggered, it becomes a market order. You will not necessarily receive $8.50 per share; you will most likely receive a little more or a little less.
Why It Matters
Stop orders generally are a trading or short-term investing strategy. They are useful because they help reduce the pressure of monitoring your trade day-to-day; the trade is largely set on autopilot. This can be particularly helpful for emotional investors.
Even though stop orders offer crucial trading discipline to investors by helping them make important decisions about cutting losses, they also increase the risk of getting out of a position too early -- especially when volatile stocks are involved. In our example, if XYZ was known to be volatile and fluctuated from $8.00 to $12.50 during the one-month forecasting period, then you would miss out on the price appreciation that you expected.
Long-term buy-and-hold investors probably don’t want to make substantial use of stop orders. When a stock goes lower, stop orders will lock in losses rather than give you a chance to evaluate whether a slight price decline is actually signaling a buying opportunity.
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