The following equity order types are currently available for both Canadian and U.S. markets: Market, Limit, Stop Market, Stop Limit, Trailing Stop Market, and Trailing Stop Limit.
The order type will automatically default to Market which means your stock will be sold at the best possible price at the time the order reaches the marketplace. You can also choose the following options from the Order Type drop-down menu:
Limit: Sets the maximum price you are willing to pay for a buy order or minimum price you are willing to accept for a sell order
Stop Limit or Trailing Stop Limit: These will become a Limit Order after the Trigger Price has been reached
Stop Market or Trailing Stop Market: These will become a Market order after the Trigger Price has been reached
The trigger price is what activates a 'Stop Market' or 'Stop Limit' order.
All Market orders (including Stop Market and Trailing Stop Market orders) are executed at the best available price once the order reaches the marketplace. The execution price for these order types is not guaranteed and can deviate significantly from the current price, last trade price or trigger price under certain circumstances.
For example, this may occur when the stock or overall market is experiencing a high level of volatility or if the order quantity is relatively large in comparison to the security's volume and/or the number of shares that are available on the bid or offer at that time.
Before using a Stop Market or Trailing Stop Market order, investors should consider the following:
Short-term market fluctuations in a stock's price can activate a Stop order, so a trigger price should be selected carefully. It is possible that a Stop Market or Trailing Stop Market order to sell is triggered due to a sudden sharp decline in the price of a security. In many, but not all, of these cases, the price of the security quickly reverts back to a price close to the pre-decline period. Under this scenario, the investor may have sold the security at a low price during the short-term drop. The opposite is true for a Stop Market or Trailing Stop Market order to buy.
The Stop price (or Trigger price) is not the guaranteed execution price. The trigger price is a trigger that causes the Stop order to become a market order. The execution price received for this Market order can deviate significantly from the trigger price in a fast-moving market where prices change rapidly.
Investors can protect themselves against market volatility and avoid the possibility of an order executing at an unexpected price by placing a Limit, Stop Limit or Trailing Stop Limit order. A Limit order sets the maximum price that you are willing to pay (for a buy order) or the minimum price you are willing to accept (for a sell order). For Stop orders you would select an order type of Stop Limit or Trailing Stop Limit.