Therefore, I thought it might be helpful to share what I learned with you, and to immortalize a “how to set a stop limit order” on this blog so that I can use it as a future reference for myself. To be frank, I have learned a lot of lessons from do-it-yourself investing. I didn’t know that you could set stop limit orders in 2009 when I saw parts of my portfolio tank by greater than 25% in one day.
After that, I set up a stop limit order on some Telus (TSX: T) shares prior to me going away for holiday (I set it so that I could preserve some gain on the shares I owned)– then it backfired on me because it dipped that day to the trigger amount, and then continued to climb, climb, climb, and climb even more (I bought some shares back at a higher price, but had I not set it for that amount, I would have done quite well for myself with Telus).
(Isn’t that what blogging is all about- sharing your experiences so that you can use it as a future reference post for later on? lol)
Anyway, here is the step-by-step guide for the newbie investor on how to set up a stop limit order.
Let’s start off by defining what the heck this is.
What is a Stop Limit Order?
According to Investopedia, a stop limit order is an order placed with the brokerage that combines a stop order and a limit order. Once the price reaches that price that you set, the order will be executed.
For example, let’s say you bought Telus shares on the Toronto Stock Exchange at $10.00 (yes, I know this not realistic of the current price lol). If you set a stop limit order for $9.00, if the price reaches $9.00 (or lower) then the order to sell the number of shares you indicated will automatically be triggered. So if the price reaches to $5.00 you will have sold it for $9.00 and theoretically protected yourself from the $4.00 per share loss.
Related: Canadian Dividend Investing: Telcos
On the Canadian stock exchange, the stop and limit price must be of the same value, says Questrade.
Why You Should Set a Stop-Limit Order
Now, some people might not care about setting stop-limit orders, especially the hardcore dividend lovers, because they purchased that stock for the monthly or quarterly dividends, not for the capital gains, and they might not care about how much it is worth as long as it continues to pay dividends. For these people, they don’t set a stop-limit order because even if the stock tanks, they are still getting dividends (and can even see it as an opportunity to buy more shares because the stock dipped- sale time!).
If you’re a bit more risk averse and are okay with selling stocks without having to monitor them constantly, and don’t want to see a stock dip to more than 25 percent of your purchase price, you might want to look into setting a stop-limit order so that you can avoid this scenario.
How to Set a Stop Limit Order in Questrade
1) First of all, you need to make sure that you have the shares already in your portfolio (e.g. you can’t set a stop limit order to sell something when you don’t even own it in the first place)
2) Click on the Buy/Sell button
3) Click on Sell
4) Enter the ticker symbol of the equity you want to set a stop limit order on
5) Enter Quantity of the shares, then change order type to “stop limit”
6) Enter the same number in the limit price and stop price text box (depending on what loss you are comfortable selling it at)
7) Click on GTD (good to date) and set the date into the future (whenever you want to keep this order until- I usually do 3 months)
8) Press Send Order
And et voila, you have a stop limit order. You can check your handy work in the green Orders tab in your IQ Essential.
Readers, I know this is rudimentary, but we all have to learn somewhere! 🙂 If you have absolutely no interest in doing this type of leg work on your own, I recommend checking out Wealthsimple – my preferred robo advisor!