Placing Limit Orders on RobinhoodSo youve just opened an account with Robinhood and are excited to place your first commission-free trade. You notice there are a few different types of buy order types to choose from and are not sure which one to pick. This article will cover how to place two of the most popular order types limit and stop-loss orders - on the Robinhood app.What is a Limit Order?A limit order to buy or sell stock is one of the safest order types to use because you have complete control over the price you are willing to pay or accept for the shares you are buying or selling. With a limit order, you specify the limit price - the maximum price youre willing to pay to buy a stock or the lowest price youd accept when selling shares. This gives your broker instructions to only execute the trade if they are able to get your desired price or a better one (a lower price for buys and a higher price for sells).How to Place a Limit Order on RobinhoodWell walk through a quick example below where we place a limit order to buy 100 shares of SPDR Gold Shares ETF (GLD). Youll notice that once you click on Buy on the Robinhood app it automatically defaults to a market order, which is an order type that instructs the broker to execute your order immediately at whatever the current market price is. We dont want this, so in the upper right hand corner of the screen, click on Order Types, and this will direct you to the below menu where we want to select Limit to change the order type. Show The next screen will ask you to enter your limit price, which in our case for GLD is $122. This means that we are expressing our desire to purchase 100 shares of GLD at a price of $122 or lower per share. At the time the order was placed, GLD was trading at around $123 per share, so our order was unlikely to be filled right away, but we are fine letting the order stay open so that it may be filled if the price comes down a little. Robinhood ComparisonWhat is a Stop-Loss Order?A stop-loss order is another popular order type which takes a basic market order and adds some conditional logic that activates the market order only after the stock price reaches a specified level. Lets say I own 100 shares of stock XYZ, which is currently trading at a level of strong historical support (~$10), and I want to be ready to sell it quickly if it falls below this level, but I cant watch my screen all day. I could set up a stop-loss order with a stop price of $9.75, which would automatically sell my shares of XYZ at the market price (i.e. a market order) only if and when the stock price falls to at least $9.75.Placing a Buy with a Stop-Loss OrderStop-loss orders can also be used when purchasing stock if you want to wait for the market price to reach a certain level before jumping in so to speak. For example, lets say from our previous example that we still want to buy 100 shares of GLD, which is currently trading at $123, but we only want to buy it if the stock price demonstrates sufficient strength by breaking a near-term resistance level at $125. In the below screenshot, you can see we setup a stop-loss order to buy 100 shares of GLD at the market price only if and when the stock price first reaches $125.Robinhood Fee on Limit and Stop Limit OrdersRobinhood is not charging commission for both Limit and Stop Limit orders for all stocks and ETFs.Conclusion: Limit and Stop-Loss OrdersLimit and stop-loss orders are both popular order types because they give the investor/trader a great deal more flexibility and control over the terms of their trades than do basic market orders.Webull PromotionOpen WeBull Account Continue Reading |
