Hello fellow investors,
I've done plenty of research of what the terms mentioned in the title implies but I am still confused and I found no other way than to confirm my thesis with some experienced investors on this subreddit.
So when you place an OCO order there's four things (XXXX) that's needed to be filled in:
Limit
XXXX
Stop Limit
XXXX
XXXX
Amount
XXXX
So let's say we wanna place an OCO SELL order for a company with the name “Pear”. Currently one single share of their company is worth $50. So as an invenstor I want to maximize my profits and minimize my losses so after thinking and anylyzing the chart, I made my decision that if “Pear” reaches $60 I want to sell ALL my shares immediately. Let's say I've invested 20 shares. I also want to make sure that the price doesn't drop too much and screws me up so I need to set a Stop limit. So I've decided that if OCO drops to or below $45 I want to set a limit order at $44,5. In that way I won't lose too much. So filling the OCO order would look like this:
Limit
60 USD
Stop Limit
45 USD
44,5 USD
Amount
20
However, I am confused about the “Stop limit” part. I've seen dozens of people placing a stop at a certain amount and then setting the limit slightly below the stop amount as I've done in this example. I wonder why they do that and why they woudn't just sell it at $45 in my example? Is it because if there ONLY was a stop it would actually sell as soon as it went below $45 but imagine it went straight to $30. Then I would be in great loss. Does this work as like an extra security thing so that when it actually drops to $45 or below it would 100% sell at a price of $44,5 even if it dropped straight to $30?
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