Excerpt from: Day trading newsletter Issue No. 003
Stop Limit & Stop Market Orders
From: Curt G.
Christopher, thanks in advance, my question is what happens
on a gap down open from the previous close. If you have set
a stop limit in between the previous close and the next day
open, will you automatically get filled or do they just pass
you bye?
Curt
~~~Christopher's Response~~~
Curt,
A few things could happen in this situation. Just reverse
the following to apply it to shorts.
First of all, if you have set a "stop limit" order and the
stock opens below your order, then yes, your order would
remain unexecuted unless and until the stock trades into your set price.
If instead you had set a "stop market" order and the stock
gaps down before the open, then once the stock opens for
trading your order will be executed in the order it is
received at the open of trading. This is because "stop
market" orders become market orders once the "stop"
price is hit (trades).
Follow-up To Question -
Thanks Cristopher, got it. Will the fact that you have a
"stop market" order in place on an unexpected bad news event
help you to be filled ahead of everyone else who is trying
to bailout of there position by placing a regular market order?
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