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jarzola jarzola
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Explain the use of limit orders and stop-loss orders in rebalancing an investor's stock portfolio. What are the principal risks in using these orders?
Textbook 
Fundamentals of Investing

Fundamentals of Investing


Edition: 14th
Authors:
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SirangelouSirangelou
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Limit orders can be used to buy or sell securities. They can ensure that an investor buys only at or below his or her desired purchase price or sells only at or above the desired price. The risk is the order might not be executed. The stop-loss order can be used to limit the downside loss exposure of an investment, or to protect a profit. The principal risk is whipsawing-where a stock temporarily drops then bounces back up after an investor has sold it at the low price.
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