Q: This is in response to Dave's earlier question re: Stop Losses/Limits
A very simplified way of thinking of the orders is like this:
Stop Loss orders generally guarantee that your order will be filled - however, there is NO guarantee that it will be at the price you specified. (In the case of a rapidly falling stock price, there's a very good chance that your fill price will be BELOW your specified stop loss price. This usually happens when there is bad news: earnings misses, Sino Forest type situations etc.)
Stop Limits generally guarantee the PRICE of your order - but NOT that the order itself will even be filled. (Again, when there is a rush to exit a stock, there's a good chance that the limit order will be by-passed altogether and one is then exposed to whatever market risk is at hand at that time.)
A very simplified way of thinking of the orders is like this:
Stop Loss orders generally guarantee that your order will be filled - however, there is NO guarantee that it will be at the price you specified. (In the case of a rapidly falling stock price, there's a very good chance that your fill price will be BELOW your specified stop loss price. This usually happens when there is bad news: earnings misses, Sino Forest type situations etc.)
Stop Limits generally guarantee the PRICE of your order - but NOT that the order itself will even be filled. (Again, when there is a rush to exit a stock, there's a good chance that the limit order will be by-passed altogether and one is then exposed to whatever market risk is at hand at that time.)
