Long-term investors usually invest Buffett-style, not touching investments even when security prices drop. For those wanting to cash out soon as a short-term trader, the take-profit order (T/P) is the way to go.
A take-profit order is a limit order, which means the securities will be sold at the trigger price set by the security holder for the gains. For example, Barnaby Jones might set a take-profit order for when his stock reaches $300 per order. The stock has been hovering around the $290-$295 range for a while...and eventually, it hits $300. His limit order will cash him out at this point, even if the stock keeps rising afterwards.
Take-profit orders are often used with stop-loss (S/L) orders. If T/P orders are the upper bound, S/L orders are the lower bound. Say Barnaby sets his T/P to $300 and his S/L to $250. As soon as the stock dipped to $250, this would trigger his stocks to be cashed out.
S/L and T/P orders can help short-term traders manage their risk, getting traders out of the game while they’re ahead. Traders might set T/P orders based on technical analysis, and/or based on their profit goals.
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Finance: What are Limit Order, Sell Limi...4 Views
Finance a la shmoop what is a limit order? you want to sell a thousand shares
of Colonel electric it was demoted after they cut their dividend the shares have [Scissors cuts dividend in half]
been trading wildly between $15 and $25 a share you don't want to feel like a
moron for having sold them at fifteen bucks when six weeks later they kissed
25 with tongue so what do you do well you put in a limit order that is you put
a limit of a minimum price of 25 bucks a share for Colonel Electric such that [Pile of stocks appear]
those shares will simply sit in your account unsold maybe forever until
somebody out in the wild blue yonder of Stockland is willing to pay twenty five [Woman standing at a colonel electric stand]
dollars or more for the shares where you have a minimum price limit of 25 bucks a
share in your order so here's to hoping they sell and don't get further demoted [Man carries stock into car]
Sargent Electric is just a place you don't want to go
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