Stop Orders
- What is a Stop Order?
- What is a Hard Stop Order?
- What is a Trailing Stop Order?
- What is a Sell on Stop Order?
- What is a Buy on Stop Order?
What is a Stop Order?
A Stop Order is an effective tool which can assist you in managing your investment portfolio. Stop Orders can help protect your profits and guard against downside risk, even when you can't keep an eye on the markets. There are differences in the minimum order size that exchanges will accept for Sell on Stop Orders*. We offer our clients four different types of Stop Orders: Hard Stops, Trailing Stops, Sell on Stops and Buy on Stops.
What is a Hard Stop Order?
Hard Stop Orders are very similar to Limit Sell Orders. A Hard Stop Order lets you place an order to sell stock that you own at a price that is above the current market price. Much like a Limit Sell Order, with a Hard Stop Order, you select a firm or "hard" price at which you are prepared to sell your stock to lock in your gains.
The difference between a Hard Stop Order and a Limit Sell Order is the duration of the order. The Limit Sell Order has a maximum duration of 45 calendar days, while a Hard Stop Order is good for 365 days. You can set up your desired sell price (Price Limit) and not have to worry about whether you have a sell order when you are not monitoring the price of your stocks. Your Hard Stop Order will remain open until your stock is sold at your specified price, or until you cancel the order, or until your order expires after 365 days. In the weeks prior to the expired date, we will send you a MyLink/email to remind you that your order is about to expire.
topWhat is a Trailing Stop Order?
Trailing Stops are based on a more complex investing strategy. Rather than relying on a strategy that locks in your gains once the stock reaches a set price Stop price, Trailing Stops allow for the potential of greater gains. A Trailing Stop Order will follow or "trail" the movement of a stock price as the price climbs. The order's sell price, or Stop Price, will be re-calculated upwards, based on your selected percentage, each time a new Closing High*** is reached. The following minimum price increases must occur from the previous Closing High for your Stop Price to be re-calculated:
| Stock Price | Increase in previous Closing High which results in a re-calculated Stop Price |
|---|---|
| $5.00 - $25.00 | $0.50 |
| $25.01 - $50.00 | $1.00 |
| $50.01 - $100.00 | $1.50 |
| $100.01 + | $2.50 |
Please note: Trailing Stop Orders are only accepted on stocks valued at $5.00 or higher and. have a maximum duration of 365 days. In the weeks prior to the expired date, we will send you a MyLink/email to remind you that your order is about to expire.
BMO InvestorLine requires that you also include a Limit Variance that is no more than 20% away from your initial Stop Price. If the stock's price falls to your order's calculated Stop Price, your order will be triggered** as a Limit Order according to your Limit Variance.
topWhat is a Sell on Stop Order?
A Sell on Stop Order is an order to sell a stock if its price falls to a certain pre-determined amount (Stop Price). This type of order is intended to limit losses on a stock if the price of that stock begins to fall. You can use Sell on Stop Orders to keep an eye on the market for you. In addition to setting a Stop Price, BMO InvestorLine requires that you also include a Stop Limit that is no more than 20% below your initial Stop Price. Sell on Stop orders can have a maximum duration of up to 45 calendar days by selecting your desired "Good Until" date.
There are differences in how stock exchanges manage Sell on Stop Orders. One key difference is that your order will be triggered when a board lot trades at your Stop Price, except on US markets. BMO InvestorLine's internal handling policy for stop orders on US markets is as follows: Sell on Stop orders are triggered when the Bid meets or falls below the Stop Price.
topWhat is a Buy on Stop Order?
A Buy on Stop Order is an order to buy a stock if its price rises to or exceeds a pre-determined amount (the Stop Price). This order is intended to limit losses, specifically on a short stock position if the price rises. You can use Buy on Stops to keep an eye on the markets for you. In addition to setting a "Stop Price", BMO InvestorLine requires that you also include a Stop Limit that is no more than 20% above your initial Stop Price. Buy on Stop orders can have a maximum duration of up to 45 days by selecting your desired "Good Until" date.
There are differences in how stock exchanges manage Buy on Stop Orders. Be aware that your order will be triggered when a board lot trades at your Stop Price or higher, except on US markets. InvestorLine's internal handling policy for stop orders on US markets is as follows: Buy on Stop orders are triggered when the Ask meets or rises above the Stop Price.
top* Stop orders for TSX-listed securities must be entered in board lots or mixed lots. Stop orders entered on US exchanges can be entered in odd, board, or mixed lot sizes.
**Your Sell on Stop and Trailing Stop Orders will be triggered when a board lot trades at your Stop Price, except on US markets, where a matching Bid will trigger your sell order. Your order will not be filled for a price that is less than your Stop Limit. Sell on Stop and Trailing Stop Orders are executed on a best efforts basis. We cannot guarantee that your order will be executed at the Stop Price or your indicated Stop Limit once your order is triggered.
***Closing High: The last highest closing price for the stock since the Trailing Stop Order was placed (not necessarily the previous close). The Trailing Stop percentage is initially applied to the previous day's closing (Previous Close). Subsequently, this percentage is applied to any new Closing High.
