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Stop loss sell orders are limit sell orders that are placed below market price. When the share price drops to the designated price, a sell order is executed protecting the investor from further declines.
An investor sold a stock short and is worried about rising prices. To protect himself from rising prices he would place a:
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A limit order to buy is placed below the current market price. A limit order to sell is placed above the current market price. A stop (loss) order to buy is placed above the current market price. A stop (loss) order to sell is placed below the current market price. A stop order becomes a market order if the price is hit.
An order placed to protect a short position is called a:
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A short position profits from declines in stock price and experiences losses as the price rises. A stop loss buy is a limit order that is placed above the market price. When the stock price reaches the stop price, the limit order is executed curtailing further loses.
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