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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.

This post relates to investing and how to keep yourself relatively safe from risk.  Since I’m not an avid investor (I usually buy stocks only a few times a year) I often forget how to do certain technical things when I am doing my Do It Yourself Investor activities on Questrade.

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)

Related: Starting to Invest? Try A Mock Portfolio

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.

Stop Limit Order

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!


Article comments

Stacey says:

I appreciate the rudimentary…thank you for thinking of people like me.

John says:

I’m practicing with a questrade trial account. Why does it say ” you are creating a new short position with the stop limit order that may have additional risks” i did exactly that. I don’t want to short

Robb Engen says:

Hi John, the difference is in how you set up the stop limit:

If you’re long a stock you’d place a stop limit by entering a “sell” stop-limit: For example, sell 200 XYZ at $12 stop, $11.75 limit.

If you want to be short a stock you’d place a stop-limit by entering a “buy” stop-limit: For example, buy 200 XYZ at $18 stop, $18.50 limit.

Ted says:

I have no idea what is stop order, let alone stop-limit order.
eg. You can limit the price to sell/but with Limit. Si, why the “Stop”? What is deifferent?
Recently I read “Stop orders are generally used to limit losses or to protect profits for a security that has been sold short.”

I am very interested to short sell… Can someone tell me how to use stop order?

Robb Engen says:

Hi Ted, in all likelihood you’ll never need to use a stop order. First of all, stop orders are not allowed on Canadian exchanges.

Here’s an example if you were “long” a stock (i.e. wanted it to increase in value): If you own shares that are trading at $10, you can place a stop-sell order at $9/share. If the stock price drops to $9, the stop-sell order will trigger and execute as a market order at the selected stop price ($9).

And if you were short a stock: Suppose you short stock XYZ at $20 as you anticipate its price to decline in value in the near future. But to protect your trade, you placed a stop-buy order at $22. If the stock price rises to $22, the stop-buy order will trigger and execute as a market order at that selected stop price ($22).

Teejea says:

Thank you so much! New traders should understand this because it was very clear and straight to the point of difference between stop loss & stop-limit…I did!

Brandon says:

i want to swing trade but i don’t know how to set a sell price above what i bought a stock for.

Martin says:

I think Limit shouldn’t be the same as Stop. For example if you want to sell when the stock hits $35 then you would set stop at $35 and if you are OK to sell between $30 and $35 then you would set limit at $30. This way a limite sell order will be created when the stock hits $35 and it will sell if someone sells below $35 but above $30. If you set both stop and limit at $35 there are chances you will never sell because the stock will already be selling below $35 after it triggers. In case you want to sell at any market price below $35 then you don’t need the limit you can just set a stop order as noted by daniel above. No?

daniel says:

why not just set a “Stop” order. .why “Stop, Limit”? Isn’t Stop, Limit order for when you want to sell a stock if it gets above your limit for profit or Stop sell it it if falls below a certain price to stop loss?

Kyle says:

No, not really Daniel. Limit is to order if it hits a certain point.

BeachBoy says:

And the difference between stop and limit for us buying US securities?

Terence says:

This all sounds so simple, but SO useful! Thanks for the reminder 😀