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Selling shares uncovered: What you need to know about sell limit orders

by , 05 June 2014

When it comes to selling your shares, the money you can sell them for is very important. Think about a share sitting nicely in profit. You want to try and sell it for as much as you can. So how can you do that? By using sell limit orders. Read on to find out more…

Selling your shares

When selling shares, you can tell your stockbroker one of two things.

You can instruct your broker to sell them at market. This means your broker will try and get a good a price as he can for your shares.

Or you can tell your broker to sell by means of a sell limit order. This tells your broker to sell you shares at a particular price or higher. So you place a limit order about the current share price.

A sell limit order works well if you’re just trying to sell at a higher price to maximise your profits. Of course, if the market doesn’t trade to that level, you’ll still have your shares.

You use sell limit orders if you’re bearish on the share in question and you think its price is going to fall. But you also think that the share price is going to move around a lot allowing you the chance to exit your trade.

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How sell limit orders work in practice

You own 100 shares in Company ABC. It’s currently trading at R500. You only want to sell your shares if you can get R550 for them. You think that level reflects the fair value of the share.

To try and get this level, you could place a sell limit order at R550. Once the price gets there, your sell limit order converts to a market order. Your request is filled at R550 or even higher.

So there you have it, what you need to know about sell limit orders.

Selling shares uncovered: What you need to know about sell limit orders
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