If you think the price of a stock you own might begin to decrease, you can attempt to protect profit or limit losses by placing a stop-on-quote order. With a stop-on-quote order, a trade will only be initiated once the price reaches a specified level, or trigger, called a stop price. Whenever the bid price (sell orders) or ask price (buy orders) reaches or surpasses the stop price, the stop-on-quote order becomes a market order. For this reason, a stop-on-quote order does not guarantee you will receive or pay the stop price. When the trade takes place, the price may have increased or decreased, depending on trading volume and how quickly your transaction is processed. A stop-on-quote order, if triggered, guarantees execution but not price.
This type of order is also referred to as a 'stop-loss order'.
Stops are not a definite guarantee of getting the desired entry/exit points. For instance, in a downward fast moving market, a stop-on-quote order can be triggered at the stop price, but executed at a price significantly lower than expected.
There are two types of stop-on-quote orders: buy and sell.
Buy Stop-on-Quote Orders - The stop price is set above the current ASK price
Sell Stop-on-Quote Orders - The stop price is set below the current BID price
Depending on market conditions, once the order is triggered, there is no guarantee of the execution price, and the price received may be several points away from the stop price.
These types of orders also may be placed with special instructions, like GTC (Good til Cancelled) and GTD (Good til Date).
- GTC - A GTC order will remain active until it is filled, cancelled by you, or no action has been taken by the last day of the month following the month of order entry. For example, a GTC order placed on March 15 will expire on April 30 at Scottrade.
- GTD - A GTD order will remain active until a specified date and a specified time chosen by you.
- Day Order - A day order will expire at the end of the trading day, if it's not executed before market close.
Any order submitted outside of market hours for regular session trading will queue until the next business day.