If you’re a trader or investor and you wish to limit your losses, you might use a plethora of orders to enter and exit the stock market automatically. For this, you can use stop-loss and limit order strategies. However, it’s vital to know the distinctions between these numerous options and how to set them up correctly.
And even when it comes just to stop-loss, there are two types of orders. Luckily, in this article, you can find all the necessary guidelines for setting up a stop-loss order efficiently.
How to Set a Stop-Loss Order in Robinhood on a PC
Stop-limit orders give you additional control over the execution of your transaction by adding a trigger. A limit order is triggered whenever the options contract reaches the stop price you designate. The limited order will be implemented if contracts are offered at or better than the price you specify in your limit order. In the event of a loss or a profit, investors might employ stop-limit orders.
There are no commissions or per-contract costs when you trade options on Robinhood. However, other platforms might charge you.
So, how can you set up that limit to trigger the stop-loss Function? Here’s how you can do it using a PC:
- Log into your Robinhood account.
- Click on the three horizontal dots on the top right corner.
- Navigate to the option order screen.
- Click on “Stop Price.”
- Insert the desired amount.
- Select “Continue” and choose between the one-day or 90 days time options. If you want to have the stop-loss option set for a couple of days, it’s best to go with the 90 days option.
- Enter the number of shares you want this setting to apply to.
- Click “Review” to check your settings.
How to Set a Stop-Loss Order in Robinhood on an iPhone
For users that like to do their trading and investing on the go, there is a convenient Robinhood app for both iOS and Android. Here’s how you can set up a stop-loss order using the iPhone app:
- Launch the Robinhood app on your iPhone.
- Scroll down to the bottom of the page, and you’ll see a list of all of your stocks.
- From the list, choose the stock for which you would like to set a stop-loss.
- The stock’s past performance and other relevant data may be found here. Tap on the “Trade” button, which may be found at the bottom right.
- Select the “Sell” option.
- At the top right of the page, select “Dollars.”
- The “Dollars” option will bring up a few additional choices when you tap on it. So, in the “Conditional Orders” section, tap on the “Stop Order.”
- Tap the Continue button to proceed.
- Enter your stop price (which should be lower than that stock’s market price) and then press “Continue.” You may choose “One trading day” as the time period. The second option is to have the set stop-loss on for 90 days. So, if you’re holding for a few days, go with option two.
- Enter the number of shares for which you wish to set this stop order and select the “Review” option.
The following page will show you the complete specifics of your order. Stop-loss orders can be sent by swiping up.
How to Set a Stop-Loss Order in Robinhood on an Android Device
For the Android users out there, the Robinhood app also allows you to set stop-loss orders. Here’s how:
- Open the Robinhood application.
- There will be a list of all your stocks at the bottom of the page.
- Select the stock for which you want to establish a stop-loss from the list.
- The stock’s historical information and other important data may be found here. Tap on the “Trade” button that is located at the bottom-right of the screen.
- Choose “Sell” from the drop-down menu that appears.
- Select “Dollars.”
- Tap on “Stop Order” in the “Conditional Orders” section.
- Press “Continue.”
- Enter your stop price (which should be lower than the stock’s market price) and tap on “Continue.” One trading day is a one-time option. Setting a stop-loss for 90 days is the second option. Consider option two if you plan to have this stop-loss set for a few days.
- Select the “Review” option after entering the number of shares for which you intend to place this stop order.
Your order’s details will be displayed on the next page. Swiping up can be used to send stop-loss orders.
Additional FAQs
Is it possible to establish a Robinhood stop-loss after business hours?
The extended-hours session will not allow stop orders to be executed. Orders placed during extended hours will be queued for the next trading day’s market open.
Is it possible to put a stop-loss in place after you’ve made a purchase?
Yes. Using a stop-loss order to restrict your loss to, say, 10% of the price at which you purchased the stock is an example of this. You can immediately place a stop-loss order of $17, for instance, after purchasing the stock. Your shares will be sold at the current market price when the stock falls below $18.
When setting stop-loss levels, how do I know what level to place them at?
When setting stop-loss levels, technical analysis may be quite helpful. In the case of a long position, for example, determining the stock’s critical support levels might be necessary for assessing the stock’s downside risk. To put it another way, it’s possible that the stock will suffer further losses if a significant support level is broken. However, be on the lookout for false outbreaks prior to entering stop-loss levels into your trading platform, conduct thorough research utilizing technical analysis and other tools.
Can I use stop-loss orders to safeguard long and short positions?
Definitely, in this context, the name “stop-loss order” is a little bit misleading. Stop-loss orders are mainly intended to guard against significant losses on both long and short positions. However, since they get triggered when the security’s price trades over a specified level, they can be utilized against large gains on current holdings as well. Even so, because stop-loss and stop-loss orders are transformed to market orders after they are broken, their actual price execution may be considerably below or above the stop-loss price.
Gain Greater Control Over Your Stocks
To provide investors and traders with more control, stop-loss orders allow them to set a price restriction for each transaction. Once a stock’s price reaches the stop price, a limit order is activated, which instructs the market maker to buy or sell it at the limit price. The option limits losses by setting the point at which the investor is unable to tolerate losses.
Although stop-loss orders can help minimize your losses, neither of these strategies is infallible. A stop-loss order may be performed at a price considerably different than the stop-loss price once the stop-loss threshold has been broken. Make sure you do your own research and understand the benefits and downsides of this type of order before placing it.
Have you ever set a stop-loss order before? Have you ever traded stocks on Robinhood? What do you like about this platform? Let us know in the comment section below!
FAQs
Most of the traders use the percentage rule to set the value of the stop-loss order. Usually, the one who wants to avoid a high risk of losses set the stop-loss order to 10% of the buy price. For example, if the stock is bought at Rs. 100 and the stop-loss order value is set to 10% (Rs.
How do you set a stop-loss? ›
Most of the traders use the percentage rule to set the value of the stop-loss order. Usually, the one who wants to avoid a high risk of losses set the stop-loss order to 10% of the buy price. For example, if the stock is bought at Rs. 100 and the stop-loss order value is set to 10% (Rs.
Can you set a stop-loss and limit sell at the same time Robinhood? ›
Not only is it possible to enter the market on a limit and place a protective stop at the same time, but it is encouraged to help protect large losses and manage risk.
Can you set limit orders on Robinhood? ›
Due to high volatility in the options market, Robinhood requires you to set a limit price for all options trades. With a buy limit order, you can set a limit price, which should be the maximum price you want to pay for a contract. The contract will only be purchased at your limit price or lower.
Can Robinhood do stop-loss? ›
With a sell stop limit order, you can set a stop price below the current price of the stock. If the stock falls to your stop price, it triggers a sell limit order.
Can you set automatic stop-loss on Robinhood? ›
Yes. Using a stop-loss order to restrict your loss to, say, 10% of the price at which you purchased the stock is an example of this. You can immediately place a stop-loss order of $17, for instance, after purchasing the stock. Your shares will be sold at the current market price when the stock falls below $18.
What is the 2% stop-loss rule? ›
One popular method is the 2% Rule, which means you never put more than 2% of your account equity at risk (Table 1). For example, if you are trading a $50,000 account, and you choose a risk management stop loss of 2%, you could risk up to $1,000 on any given trade.
Does it cost money to set a stop-loss? ›
The most important benefit of a stop-loss order is that it costs nothing to implement. Your regular commission is charged only once the stop-loss price has been reached and the stock must be sold.
Does stop-loss work after hours Robinhood? ›
Stop orders won't execute during extended or overnight hours. The stop limit and stop loss orders you place during extended or overnight hours will queue for the opening of regular market hours on the next trading day. Trailing stop orders won't execute during extended or overnight hours.
How do I set stop limit price on Robinhood? ›
To place a stop limit order, tap the gear icon in the upper right corner on the options order screen (select “⋯” on Web), and add a “Stop Price.” Learn more about stop limit orders and other order types. We're excited to roll out stop limit orders for options in the coming weeks.
Stop-loss and stop-limit orders can provide different types of protection for both long and short investors. Stop-loss orders guarantee execution, while stop-limit orders guarantee the price.
What is the difference between stop loss and stop limit on Robinhood? ›
A buy-stop order is a type of stop-loss order that protects short positions; it is set above the current market price and is triggered if the price rises above that level. Stop-limit orders are a type of stop-loss, but at the stop price, the order becomes a limit order—only executing at the limit price or better.
How to make money on Robinhood fast? ›
The fastest way to make money on Robinhood is by buying exchange-traded funds (ETFs). They give you exposure to the stock market without you having to buy an individual share. Of course, it would help if you bought an ETF that tracks the market index — for example, Vanguard's Total Stock Market Fund.
Do you actually own the stock on Robinhood? ›
Do you actually own the stock on Robinhood? Investors do own the shares of stocks and ETFs purchased on the Robinhood platform. This is the same type of stock ownership you get when you purchase stocks through most other brokerage companies.
Why traders don't use stop-loss? ›
Because they have a hedge. A common reason why a professional trader won't use a stop loss is because he is hedged with some other trade. This is particularly prevalent with certain types of trading such as spread trading, stat arbitrage or high frequency trading.
Can traders see my stop-loss? ›
Trader Risk
For starters, market makers are keenly aware of any stop-losses you place with your broker and can force a whipsaw in the price, thereby bumping you out of your position, then running the price right back up again.
Should you always trade with a stop-loss? ›
Stop-losses prevent large and uncontrollable losses in volatile trades. If you're not using stop-losses, it's only a matter of time when a large losing position will get out of control and wipe out most of your trading profits, eventually even your entire account!
Can I use stop-loss to take profit? ›
Most traders use take-profit orders in conjunction with stop-loss orders (S/L) to manage their open positions. If the security rises to the take-profit point, the T/P order is executed and the position is closed for a gain.
Can you set a stop-loss and limit sell at the same time? ›
Placing a one-cancels-the-other order, or what is also commonly referred to as a bracket order, allows you to have both a limit order and a stop order open at the same time. This allows you to lock in your potential profits and limit your losses all with one order.
What is the difference between a limit and a stop limit? ›
How Are Limit Orders Different From Stop Orders? A limit order sets a maximum price that you're willing to pay or a minimum price that you're willing to accept on a sale, whereas a stop order is triggered when an asset reaches a certain price and filled at the next available price.
The 1% rule demands that traders never risk more than 1% of their total account value on a single trade. In a $10,000 account, that doesn't mean you can only invest $100. It means you shouldn't lose more than $100 on a single trade.
Is it better to take profit or stop-loss? ›
A stop-loss (SL) is a limit order that specifies how much loss you are willing to take on a trade. It prevents you from making additional losses on a trading position. A take-profit (TP) works as the exact opposite of a stop-loss. It specifies the price to close out a position for profit.
Which is better stop-loss or take profit? ›
When comparing Take Profit vs Stop Loss, Stop Loss is more important. You can change orders once in trade, but it's recommended to avoid changing Stop Loss order once set, as traders get influenced by the power of open position once they are in an active trade. TP orders are often changed based on a situation.
Is 20% stop-loss good? ›
The best trailing stop-loss percentage to use is either 15% or 20% If you use a pure momentum strategy a stop loss strategy can help you to completely avoid market crashes, and even earn you a small profit while the market loses 50%
What is a good stop-loss limit? ›
Stock Trader explained that stop-loss orders should never be set above 5 percent [3]. This is to avoid selling unnecessarily during small fluctuations in the market. Realistically, a stock could fall by 5 percent midday, but rebound.
What is the 6% stop-loss rule? ›
6% rule: No new trades will be opened for the remainder of the month if the sum of your losses for the current month, and the risk in open trades, hits 6% of your total account equity. A goal of any trader, especially one just starting out, is long-term survival.
What triggers a stop-loss? ›
If a stock price suddenly gaps below (or above) the stop price, the order would trigger. The stock would be sold (or bought) at the next available price even if the stock is trading sharply away from your stop loss level.
What is the best take profit strategy? ›
In general, the best ratio is 1:3, so the profit should be 3 times bigger than the loss. For example, if your Stop Loss equals 50 pips, the Take Profit should be 150 pips. In some cases, other Risk/Reward ratios are possible.
What is better a limit order or a stop order? ›
Remember that the key difference between a limit order and a stop order is that the limit order will only be filled at the specified limit price or better; whereas, once a stop order triggers at the specified price, it will be filled at the prevailing price in the market--which means that it could be executed at a ...
What happens if stock opens below your stop loss? ›
As the stock begins to decline in value, if the stock trades at or below the stop price, the order will trigger and become a limit order to sell at the specified limit price. Because the order is now a limit order, execution cannot occur unless the position can be sold at the limit price specified (or better).
Note: A stop loss order is valid only for a trading day. If your stop loss order is not triggered during the trading day, it shall lapse automatically at the end of the trading session.
Is a stop loss a day trade? ›
Placing a stop-loss order does not in and of itself count as a day trade. However, if that stop-loss order is triggered on the same day the position is opened, then that will be considered a day trade.
What is the difference between stop price and limit price? ›
The stop price states that you'll buy or sell at a specific price. The limit price sets a standard for buying or selling a number of stocks when the price reaches the set price.
How should I set my limit price? ›
If you want to buy or sell a stock, set a limit on your order that is outside daily price fluctuations. Ensure that the limit price is set at a point at which you can live with the outcome. Either way, you will have some control over the price you pay or receive.
What does stop price mean on Robinhood? ›
A stop order is an order to buy or sell a stock or ETF once the stock reaches a specific price, known as the stop price.
What is an example of a stop-loss order? ›
A stop-loss order is a buy/sell order placed to limit losses when there is a concern that prices may move against the trade. For instance, if a stock is purchased at ₹100 and the loss is to be limited at ₹95, an order can be placed to sell the stock as soon as its price reaches ₹95.
Why would you use a stop-loss? ›
A stop loss is a type of order that investors or traders use to limit their potential losses in the stock market. It works by automatically selling a security when its price reaches a certain level, known as the stop price. This helps traders avoid larger losses if the price of the security continues to drop.
Can you day trade on Robinhood? ›
Can You Day Trade With Robinhood? Yes, you can day trade on Robinhood. Functionally, it works the same as investing does. You buy a stock through the app, and then you sell it later on in the day.
Is Robinhood good for beginner traders? ›
Is Robinhood a good broker for beginners? Robinhood is a good fit for beginner investors, and the company made our list of the best brokers for beginners. The app offers a streamlined, approachable and easy-to-navigate trading platform, plus extremely low costs, which beginner investors tend to prioritize.
What stocks will boom in 2023? ›
Best S&P 500 stocks as of July 2023
| Company and ticker symbol | Performance in 2023 |
|---|
| Royal Caribbean Cruises (RCL) | 109.9% |
| Palo Alto Networks (PANW) | 83.1% |
| Norwegian Cruise Line Holdings (NLCH) | 77.9% |
| Advanced Micro Devices (AMD) | 75.9% |
6 more rowsInvesting with a Robinhood brokerage account is commission free. We don't charge you fees to open your account, to maintain your account, or to transfer funds to your account. However, self-regulatory organizations, such as the Financial Industry Regulatory Authority (FINRA) charge us a small fee for sell orders.
Why don t investors like Robinhood? ›
Robinhood provides a bare-bones trading experience, making it a poor choice for investors seeking the best trading platform. Also, Robinhood's stock research tools are lacking when compared to $0 commission brokers such as E*TRADE, Charles Schwab, and Fidelity.
How long can you hold a stock on Robinhood? ›
This means you can't place any day trades for 90 days unless you bring your portfolio value (excluding any crypto positions) above $25,000.
What are the best stocks to invest in on Robinhood? ›
Best Stocks to Buy on Robinhood for Beginners
- GameStop Corp. (NYSE:GME) Number of Hedge Fund Holders: 14. ...
- AMC Entertainment Holdings, Inc. (NYSE:AMC) Number of Hedge Fund Holders: 23. ...
- NIO Inc. (NYSE:NIO) ...
- Plug Power Inc. (NASDAQ:PLUG) ...
- Ford Motor Company (NYSE:F) Number of Hedge Fund Holders: 40. ...
- Pfizer Inc. (NYSE:PFE)
How to Enable Options on Robinhood
- Step 1: Click “Account” on the App Home Screen. ...
- Step 2: Find the “Settings” Option in the Drop-Down Menu. ...
- Step 3: See if “Options” Are Already Available for Your Trading Account. ...
- Step 4: Press “Enable” if Options Are Available for Your Trading Account.
Stop-loss orders execute a market order when triggered, and execution of the contract is guaranteed when the stop-loss price is met. Stop-limit orders execute a limit order when the initial stop-loss order is triggered, providing investors more control over execution price.
Does it cost money to set a stop loss? ›
The most important benefit of a stop-loss order is that it costs nothing to implement. Your regular commission is charged only once the stop-loss price has been reached and the stock must be sold.
Why won't Robinhood let me do options? ›
Robinhood does not support market orders for options contracts due to greater volatility in the options market relative to equities markets. Placing limit orders will give your order a better chance of being executed at the price you want.
Why doesn t Robinhood give me options? ›
You need to have some stock trading experience before you can trade options. You can try again after you've made some trades, and update your investment profile to make sure it's accurate and up to date.
When should I use a stop-loss? ›
A stop-loss order is basically a tool used for short-term investment planning. It is used when the investor doesn't want the pressure of monitoring a security on a day-to-day basis. The trade gets triggered automatically and the limits are decided in advance. This can be very helpful for small investors.
Why Should You Use Stop-Losses? Stop-losses prevent large and uncontrollable losses in volatile trades. If you're not using stop-losses, it's only a matter of time when a large losing position will get out of control and wipe out most of your trading profits, eventually even your entire account!
What is stop-loss vs stop limit Robinhood? ›
A buy-stop order is a type of stop-loss order that protects short positions; it is set above the current market price and is triggered if the price rises above that level. Stop-limit orders are a type of stop-loss, but at the stop price, the order becomes a limit order—only executing at the limit price or better.
