Pessimistic Optimist

Cramer's Mad Money - Strategies for Staying in the Game (6/29/09)

limit orders allow you to put the price on what you are willing to pay for the stock . Say a stock is going for 18.40 and you feel that is too high considering a few days earlier it was only 18.00, you only want to pay 18.00 for it. The limit order available in your trading platform will allow you to wait until it come back to that price before you buy it. In your drop down bar ( assuming your with a company that provides this option) place your price, the number of shares and them what type of order you want.

The opposite would be a stop which is saying you owned it at 18.40 and do not want to relinquish all your profit if your concerned it will drop for some bit of news or a gut feeling. Your stop order will or should sell your stock at your chosen stop price. The closer to the 18.40 you stop the tighter the stop is. There are two ways to play that end either a % or a price numerically.