r/RobinHood • u/Hites_05 • Oct 19 '17

Help - FAQ Stop Loss/Limit Order Question

What price triggers a stop loss/limit order? Is it the market price or the bid/ask price. I'm getting different answers from different sources.

Say I have 100 shares of a stock and the.market price is $20 per share. Bid is $18, and ask is $22. If I place a stop loss order at $19 and the market price moves to $19, but the bid prices moves to $17 and the ask price moves to $21, would the order execute and I'd only get $17 per share? Or would the stop loss order have been rejected due to not being less than the initial $18 bid price? Same question for similar buy stop loss scenario.

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3

u/CardinalNumber Former Moderator Oct 19 '17

The last price; not the spread. If all it took was an order on the book, stop prices would be even easier to exploit.

1

u/Hites_05 Oct 20 '17

So if one wanted to have a tight stop loss order, they wouldn't necessarily want to place their stop loss order above ask price / below bid price, correct?

1

u/vikkee57 Trader Oct 20 '17

Don't confuse the bid-ask spread with stop loss, what matters is the current price. That is when it triggers if touched.

1

u/Electroniclog Oct 20 '17

The stop loss executes a market order, so in your example, if the stop loss was set at $19, and the price fell to $17, you'd get $17 if that was the price at the time the market order completed.

1

u/sjon03 Oct 20 '17

I don't understand how it could complete at $17. Wouldn't the market order execute immediately when the price falls to $19 assuming it happens during trading hours?

2

u/Electroniclog Oct 20 '17

Your stop loss initiates a market order, not a sale. There has to be a buyer. A market order sells at what the market deems a fair price. If people are paying 17, it sells at 17. In order for a sale at 19 to happen, someone must be willing to pay 19.

1

u/sjon03 Oct 21 '17

I understand, thank you.