Which term is used for an order to sell a stock once its price has reached a certain predetermined level?

Which term is used for an order to sell a stock once its price has reached a certain predetermined level?

• A. Market order
• B. Limit order
• C. Margin account
• D. Callable preferred share

Answer: (B)

The term that describes an order to sell a stock once its price reaches a certain predetermined level is a limit order. A limit order allows the investor to set the maximum price at which they are willing to buy or the minimum price at which they are willing to sell. When the stock reaches the specified price, the order is executed. This mechanism provides investors with control over the price at which they enter or exit positions in the market. For instance, if an investor holds a stock currently trading at $50 and wishes to sell it once it reaches $55, they could set a limit order at that price. This ensures that they do not sell for less than $55, even if the market fluctuates. Understanding limit orders is crucial for investors who want to manage their trades effectively and make decisions based on specific price points rather than market volatility.

The term that describes an order to sell a stock once its price reaches a certain predetermined level is a limit order. A limit order allows the investor to set the maximum price at which they are willing to buy or the minimum price at which they are willing to sell. When the stock reaches the specified price, the order is executed.

This mechanism provides investors with control over the price at which they enter or exit positions in the market. For instance, if an investor holds a stock currently trading at $50 and wishes to sell it once it reaches $55, they could set a limit order at that price. This ensures that they do not sell for less than $55, even if the market fluctuates.

Understanding limit orders is crucial for investors who want to manage their trades effectively and make decisions based on specific price points rather than market volatility.