While it can be difficult to decide when to sell stocks to maximize return on investment, the four basic ways to sell stocks are quite simple.
Order at the supermarket
When you use a market order, you offer to sell your stock at the best price available, so it is likely that your order will be taken immediately. However, since you are offering to sell your stock at the best price available, you have no control over the price at which it will sell. You also have no way of knowing what that price will be. Market orders can be made or not at the same price as the final trading price.
Sell limit order
Sell limit orders allow you to sell stocks at the price you specify or any price higher than that price. In fact, the limit order sets the minimum price of the stock. Sell limit orders are made when the share price reaches the limit price or higher. Because you specify a minimum selling price, your limit order may not be made if the stock never reaches that level.
You place a stop or stop-loss order to sell the stock at a specific price, called a stop price. When the stop price is reached, the stop order converts to a market order. The price of the stop order is set below the current market price of the stock to limit the losses that the investor may ins bear.
The stop order price may differ from the execution price of the order because the stop order simply triggers the conversion of a stop order into a market order. The actual price received by the seller will depend on the degree of rapid change of the share price. In fast-changing markets, prices change rapidly, so the actual price may differ significantly from the stop price.
Stop limit order
Investors can also sell stocks using stop-limit orders. When the market price is equal to the stop price, the stop-limit order converts to a limit order. Limit orders are made at the price specified by the seller or a higher price. Unless the share price reaches the limit price, the limit stop order may not be implemented. For example, you can have a stop limit order in effect when the share price falls below $30, asking to sell the stock at that time as long as the price is $28 or more.