6. Understanding limit and stop orders

Understanding How Trade Orders Work

Different trade orders such as market orders, limit orders, and stop-loss orders are created to give investors the liberty to manage their securities based on their expectations out of the investments.

Charles purchased 300 shares of an exchange traded fund (ETF) specializing in consumer staples for $90.24 per share. Charles is comfortable holding on to his shares in the face of minor fluctuations, but does not want to risk the share value falling far below his purchase price. He therefore considers placing a order so that all 300 shares would be sold if the share price falls to $88.