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A Few Last Words about Stop Orders

Some of you may be adverse to using buy stops or sell stops as the entry method for the gap trade or for the purpose of risk management. Although you may be suspicious of having resting orders in the marВэkets, thinking perhaps that they will get you or that the floor will run the stops, you are wrong. This may happen on occasion, but I sincerely feel it is the exception rather than the rule. In very thinly traded markets you may not wish to use such orders; however, in the more active orders I see no problem with using stop orders. If, however, you are still overВэcome with suspicion and paranoia about the trading floor, then I strongВэly suggest that you use either a stop limit order or that you not place an order at all, taking the chance that the market will run right through your price without your being filled.

Consider using stop limit orders where the exchange accepts them. They can be very effective. As you know, however, there will be instances in which stop limit orders will not be filled; therefore, you will have no position when in fact you should have. In the vast majority of cases, stop limit orders will work in your favor. Should you find, however, that your stop limit order was not filled due to fast market conditions, then leave the order active. In many cases the market will come back to your price and you will be filled. The risk of using stop limit orders is that you will not be filled. It's a chance you have to take if resting stop orders concern you.