A 'stop-loss' order is a conditional order to sell a security once it reaches a certain price. It operates as such:
- The investor sets a 'trigger price' for the security and submits the order.
- If the share price reduces to the trigger price, the order is put into the market
- The now-live sell order is submitted to market to be filled.
This type of order is used to limit an investor's losses and doesn't require the investor to be actively watching the market.
Stop-loss orders are available when trading ASX equities.
What are the different 'price type' options?
There are two different 'price type' options available for stop-loss orders, which are also offered for non-conditional orders - 'market then limit' and 'limit'.
You can also view further information on these price types by clicking here.
Market Then Limit
This will place the order in the market at the last price at which the shares traded.
If the 'trigger price' is reached the order will enter the market and fill at market price. The limit condition ensures the order is not filled if the share price falls below the best bid at the time of order submission.
Please note: if a market then limit order is not fully filled at the time of order submission, the order will become a 'limit' order with the limit set to the best bid at the time of order submission. As a result, if your stop-loss triggers but doesn't fill immediately, and the price drops suddenly this may result in your order filling partially or not at all.
A Limit sell order allows the seller to specify a 'limit' price, which is the minimum amount they are willing to accept per share. The shares will then be sold to any buyer willing to pay more than the specified limit, beginning with the highest bid first.
Please note: if you use the 'limit' price type and the stock price drops below or opens lower than your limit, your order may not be filled as there will be no shares available at the required price.
How do I enable the stop-loss feature in my account?
As of January 2022, stop-loss orders are enabled by default on all Selfwealth client accounts.