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Stop Orders and Stop Limit Orders to Sell
If you aren't familiar with them, you're going to be amazed at what an invaluable tool you've been missing out on. They don't cost a single red cent to use, but not using them can cost a great deal. Now let us bow our heads; for a moment with:
Stop Orders and Stop Limit Orders to Sell.
Suppose I have a stock that I bought @ $9.00 a share, in expectation of it rising to $15.00. After which, the price rises to $14.00 and settles. While still anticipating the stock to rise to $15.00, I can place a Stop Order as a safety net, at a minimum (more, but not less than) of .25 (.25=1/4 point) below the current bid price.
Now if the stock rises as expected, I can cancel my Stop Order to Sell and replace it with one of these two other types of sell orders; either a Limit or Market. Then I can execute the sell, for my originally predicted profit. Had I not used this tool, I likely would have sold at $14.00 in fear of the price sliding back down. Taking a portion my small profit with it.
In the event my venture is foiled and the price drops to the point where it's bid price strikes the same price as I set the Stop Order at, the Stop Order will become a Market Order, allowing the stock to then sell as such.
In this case, if the stock's bid price were to suddenly plummet below my Stop Order to sell, the stock would instantly sell at that unexpected lower Market price. Now if that bid price's fast drop took it down to say oh, maybe $11.50 or so, the stock would sell instantly at that price, irregardless of what the Stop Order to sell was originally placed at.
Exact same scenario only with a Stop Limit Order used instead of a Stop Order. When the stock's bid price drops down to where the Stop Limit Order is set. The Stop Limit Order then becomes a Limit Order to sell and the stock will sell as a Limit Order only. Meaning that in the event that the bid price abruptly drops below what I have placed the Stop Limit Order at, the stock will not sell. Because once that Stop Limit Order becomes a Limit Order, the stock can only sell at the exact price, that the now, Limit Order is set at. So the bid price will have to come back up again and meet the price that the Limit Order is at, before it can sell. If the price doesn't come back up and/or simply continues to drop; you are sadly, out of luck...sorry.
I'm not sure which is best. That decision would have to be made on a case by case basis. I most often choose the Stop Order to sell. But then again, that's just me.
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