Disadvantages of a Buy Limit Order
A buy limit order does not guarantee execution. Execution only occurs when the asset's price trades down to the limit price and a sell order transacts with the buy limit order. The asset trading at the buy limit order price isn't enough.
Stop loss limit orders are not ideal as they give the broker too much leverage over when and how your order is filled. IF a gap is big, then the stop loss can be jumped over and your broker can use it to their advantage. OR the Market Making routing company whom your broker sells your order to, also can take advantage.
Disadvantages. One of the most significant downfalls to stop orders is that short-term price fluctuations can cause you to lose a position.
Limit order risks
Risk of no execution – Limit orders allow you to seek a specific price or better, but they do not guarantee that an execution will occur because the price may never reach your limit price.
It gives the trader a traditional stop order, but once triggered, a limit order at their specified price instead of a market order. While the trader might prefer to sell at their limit price, execution isn't guaranteed, and the trader has risk of the stock moving lower after triggering.
The order only trades your stock at the given price or better. But a limit order will not always execute. Your trade will only go through if a stock's market price reaches or improves upon the limit price. If it never reaches that price, the order won't execute.
Use a stop order when you are more concerned with getting out of the trade and are not as concerned about the price. A stop-limit order typically ensures that you get the price you set, but it doesn't guarantee that your trade will go through.
What stop-loss percentage should I use? According to research, the most effective stop-loss levels for maximizing returns while limiting losses are between 15% and 20%. These levels strike a balance between allowing some market fluctuation and protecting against significant downturns.
Limit orders provide price protection by only executing at your specified price or better, but they might not fill at all. No order type is inherently better than another—the best choice depends on your risk tolerance and trading strategy.
Day Order: A stop-limit order with a day duration is valid only for the current trading day. If the specified price conditions are not met by the end of the trading day, the order expires and is canceled.
Placing a one-cancels-the-other order (OCO), or what is also commonly referred to as a bracket order, allows you to have both a limit order and a stop order open at the same time. This allows you to lock in your potential profits if a limit is reached and stop your losses if the stop is triggered all with one order.
Generally, stop-limit orders will only trigger during a standard market session that lasts between 9:30 a.m. to 4:00 p.m. EST. It means that stop-limit orders will not trigger outside the standard market session – such as after-hours or pre-market hours, weekends, market holidays, or when the stock halts.
Investors may cancel standing orders, such as a limit or stop order, for any reason so long as the order has not been filled yet. Limit and stop orders may stand for hours or days before being filled depending on price movement, so these orders can logically be canceled without difficulty.
Benefits of Stop-Loss And Stop-Limit Orders:
Both orders have the goal to limit losses during a stock sale. Orders can be used to protect profits on long and short positions. You can guarantee a minimum trade price when selling or a maximum trade price for a buy.
One key advantage of using a stop-loss order is you don't need to monitor your holdings daily. A disadvantage is that a short-term price fluctuation could activate the stop and trigger an unnecessary sale.
"stop-n-wait" (sometimes known as "positive acknowledgement with retransmission") is the fundamental technique to provide reliable transfer under unreliable packet delivery system. After transmitting one packet, the sender waits for an acknowledgment (ACK) from the receiver before transmitting the next one.
The main advantage of the Stop and Wait protocol is its simplicity, but the main disadvantage is that if it has 1000 packets, all packets cannot be transmitted simultaneously. So, it has to wait for the acknowledgement before sending the next packet.
Stop orders may help you obtain a predetermined entry or exit price, limit a loss, or lock in a profit. Stop orders are used most often to help protect an unrealized gain or to limit potential losses on an existing position. Here, we'll discuss how to use them in your portfolio to help protect long equity positions.
KEVIN: A market order is your go-to when you want to get out of a trade as quickly as possible during standard market hours. Generally, they execute immediately, but remember, the trade-off here is price. You will receive the current price, which could be different from the last bid you saw.
The trigger price for a trailing stop order can be based on a dollar amount (maximum of 2 decimal places) or a percentage (must be a whole percentage between 1% and 50%). If a client places an order outside of the minimum or maximum percentage, the order may be canceled by market centers.
A buy limit order only executes when the market price of the stock is at or below the order's limit price. So, generally speaking, if you place a buy limit order with a price that's above the market price, the order will execute (perhaps at a better price).
If the market moves quickly and the price never reaches your limit price, your order may not be executed at all. This can be especially problematic in fast-moving markets where prices can fluctuate rapidly.
The purpose of limit sell orders is to sell shares at the current market price or higher. The exchanges (i.e. Nasdaq and NYSE) have automated checks in place to cancel an order if the price you entered is too far below the current market price that it looks like a mistake.