To set a stop-loss order, you typically use your online brokerage platform to specify the number of shares you wish to protect and the price point at which you want the order to trigger.
Setting a stop-loss order is a common strategy used by investors to limit potential losses on a security position. It instructs your broker to sell a security once it reaches a certain price, known as the stop price.
Steps to Set a Stop-Loss Order
Most online brokers provide a straightforward method for setting a stop-loss when managing your existing stock positions. The process usually involves accessing the "sell" order interface for the stock you own.
According to the provided information, when using an online broker's sell ticket option:
- All you need to do is choose how many shares to sell and what you want the stop price to be.
Here’s a general breakdown of the process you'd follow within a brokerage platform:
- Access the Sell Order: Navigate to the specific stock you hold in your portfolio and initiate a "Sell" transaction.
- Select Order Type: Instead of a standard market or limit order, select the "Stop" or "Stop-Loss" order type. There might be options like "Stop-Market" or "Stop-Limit" (a Stop-Market order triggers a market order when the stop price is hit; a Stop-Limit triggers a limit order).
- Specify Details: You will be required to enter the following key pieces of information:
- Quantity: The number of shares you want the stop-loss to apply to. This could be your entire position or just a portion.
- Stop Price: The specific price per share at which the stop-loss order becomes active. This price is typically set below the current market price for a long position.
- (If using Stop-Limit) Limit Price: For a Stop-Limit order, you also set a limit price, which is the minimum price you are willing to accept once the stop price is triggered.
- Set Duration (Optional but common): Choose how long the order should remain active (e.g., Day order, Good 'Til Cancelled - GTC).
- Review and Submit: Review all the details of your order to ensure they are correct before submitting it.
Example Inputs
Here's a simplified look at the information you might input:
| Field | Description | Example Input |
|---|---|---|
| Action | What you want to do | Sell |
| Quantity | Number of shares for the order | 100 shares |
| Symbol | The stock ticker | XYZ |
| Order Type | How the order is executed | Stop-Market |
| Stop Price | The price that triggers the sell order | $45.00 |
| Duration | How long the order is active | GTC |
By setting these parameters, you create an automated instruction for your broker to sell your shares if the stock's price falls to or below your specified stop price, helping to protect you from further downward movement.
