Head scratcher

[LonnieTheKingpin]

Hello again:

Have you ever placed a stop order that's never executed because the bid never reaches your stop price even though the price of the stock does?

It seems to make sense, but I can't figure out how the price can get to X if nobody bid to pay X for it.

[Stocktrading101]

Stop orders can be risky because of what is called "trading through" your trigger price.

A stop order has two parts:

1. The trigger price. This triggers the "stop" and then automatically places the "order" you have preset.

2. Preset order (market order, limit order) that is activated once the stop is reached.

What happens is lets say we setup a sell stop market order with a trigger price of $100 per share. At this moment the stock is at $101. So in this example our shares will automatically be sold (via market order) as soon as the stock hits $100 per share. Well if the stock closes at $101, then opens the next day at $90 then the stock has "traded through" our activation price and the market order is never filled.

For more information check out these articles on the site:

http://www.stocktradingtogo.com/2008...p-loss-orders/

http://www.stocktradingtogo.com/2009...s-for-success/

Hope that helps!