newbie question on stops

Discussion in 'Trading' started by nemo, Nov 17, 2001.

  1. nemo



    ok let say i hold a stock thats worth 15$ and i have placed a sell stop market order at 10$.

    now i sell all of it at the market price of 13$ and do not remove the stop.

    stock goes down to 5$, triggering off the stop

    could that happen?
    would i be short the stock then?

    i would appreciate some help,
  2. Turok


    It could depend on the execution system that is used, the type of account (margin?) and the stock (shortable?), but by far the most likely answer to your question is "yes, your sell order would execute at $10 and you would be short the stock".

    Course if it then went to $5 as in your description, you're a happy camper, but more likely it nailed your price, bounced support and you have to cover at $13 again. :-(

  3. nemo



    yes, i was talking about a datek account on margin and the stock in question being shortable
  4. Magna

    Magna Administrator

    It would completely depend on your brokerage house and their software. If I remember correctly Datek doesn't distinguish between a Sell and a Short order (they're both called Sell). Most brokers draw a distinction between Selling and Shorting in their order-entry systems (separate commands, separate buttons, etc.). So with Datek you would probably be short as Turok said. With many others you wouldn't, but it's broker-dependent.
  5. Rigel


    At my broker you can't sell more than you own. If I own 100 shares at $10 and have a limit order in to sell 100 at $12, forget about it, and then try to sell 100 shares at $11 it will say "invalid order". In order to sell the shares at $11, first I have to cancel the $12 order.
    Stop and limit orders that have not been filled are usually referred to as "open orders". When you decide to sell or cover a position the first thing you need to do is pop up your "open orders screen" and cancel any order that duplicates the one you are about to enter manually.
  6. Nemo,

    At Datek the stop order would indeed be executed, leaving you short the stock. This happened to me a few weeks ago because I foolishly forgot to cancel it. Wouldn't you know it, in order to close out the (now unfavorable) position, it put me over the limit of # of round-trip day trades with a small account. I am now stuck w/o margin thanks to my error. Live and learn!:D