In this article:
Overview
A stop-market order is an order type that automatically converts to a market order once the order reaches your specified "stop price." This means your order will execute immediately at the best available price in the market.
Stop-market orders are available for Canadian and US stocks, ETFs, and options, and you can place a stop-market order at any time. Keep in mind that your order will only execute during regular market hours.
How stop-market orders work
Unlike stop-limit orders, you don't need to set both a stop price and a limit price. This simplifies the order process and can help ensure your trade executes, even in volatile markets.
Let's look at how stop-market orders work for both buys and sells below.
Understanding stop-market buys
A stop-market buy order activates when the stock's price rises to or above your chosen stop price. Once triggered, it becomes a market order and attempts to buy the shares immediately at the current market price.
Understanding stop-market sells
A stop-market sell order activates when the stock's price falls to or below your chosen stop price. Once triggered, it becomes a market order and attempts to sell your shares immediately at the current market price. Stop-market sells are often used to help limit potential losses.
Important considerations
- No price control: Once a stop-market order triggers, it executes at the current market price. In fast-moving or volatile markets, the execution price could be significantly different from your stop price. Your proceeds could be substantially less than expected for a sell, and you could pay more than you expected for a buy (which could leave a negative balance in your account that you're responsible for covering).
- Not available for crypto: Stop-market orders are available for stocks, ETFs, and options. They aren't supported for crypto at this time.
Frequently asked questions
How does a stop-market order differ from a stop-limit order?
The key difference is what happens after the stop price is triggered:
- With a stop-market order, your order executes at the current market price, guaranteeing execution (except for a halt or other market condition that prevents trading), but not at a specific price.
- With a stop-limit order, it becomes a limit order that will only execute at your specified limit price or better, providing price control but not guaranteeing execution.
Can I place a stop-market order on Canadian stocks?
Yes. Stop-market orders are available for both Canadian and US stocks, ETFs, and options. Keep in mind that your order will only execute during regular market hours.
What happens if I place a stop-market order and the stock price drops sharply before the market opens or reopens after a trading halt?
If the stock opens significantly below your stop price (due to news or other events overnight), your order will trigger immediately at market open and execute at the current market price. This could be much lower than your stop price, which is known as "slippage."
What happens if I place a stop-market order and the stock price surges before the market opens or reopens after a trading halt?
Due to overnight news and events, the price of a stock may open higher than your stop price. If the stock opens higher than your stop price, your order will trigger and execute at the current market price. It's important to keep in mind that it's your responsibility to ensure that you have sufficient funds in your account to complete an order.
Is there any price protection with stop-market orders?
No. Once triggered, a stop-market order executes at whatever the current market price is. In fast-moving or volatile markets, this could result in an execution price significantly different from your stop price.
When would I use a stop-market order instead of a stop-limit order?
You might choose a stop-market order when your priority is ensuring the trade executes once your stop price is reached, even if it means accepting the current market price. This is particularly useful in volatile markets where prices might move quickly past a limit price, leaving a stop-limit order unfilled.
Can I cancel a stop-market order?
Yes, you can cancel a stop-market order any time before it's triggered. Once triggered and converted to a market order, it typically executes quickly, and you can't cancel it.
I placed a stop-market order during extended/overnight trading. Why isn't it executing?
Stop-market orders will only trigger and execute during regular market hours. If you placed a stop-market order during extended or overnight hours, it'll remain pending until the market opens. You may cancel your order before the market opens. Canadian securities don't have extended or overnight trading hours, so any order you place outside regular market hours is queued until the market opens.
Why don't I see the stop-market order option for crypto trading?
Stop-market orders are available for stocks, ETFs, and options. We don't support them for crypto at this time. We're working on making this feature available for additional asset classes in the future.
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