Merrill Edge is a brokerage firm run by the Bank of America Corporation and provides stock brokerage services to millions of Americans. I recently came across their stop quote order type and wondered what it was all about. I did some research and here is what I found:
Stop quote orders are the same as stop orders but have been renamed by Merrill Edge in 2013 due to a FINRA rule change. A buy or sell stop quote on Merrill Edge will be executed once the market price hits the specified stop quote level.
In this article, we’ll go over why Merrill Edge decided to rename their stop order and stop limit order to stop quote orders, what the difference is between different types of stop orders, and how to place a stop quote order on Merrill Edge. Let’s get started!
Did Merrill Edge rename stop orders?
In a Notification of Order Name Changes (M470009013) Merrill Lynch announced that all stop order types will undergo a name change. This change was applied to all Merrill Lynch products and subsidiaries (including Merrill Edge) and went into effect on January 21, 2013.
According to Merrill Lynch, the reason for this name change was new regulation by the Financial Industry Regulatory Authority (FINRA) which required order type names to be more precise in order to protect consumers from misleading order type names.
The following name changes have been applied to all stop orders:
- Stop Order –> Stop Quote Order: All regular stop orders will be henceforth known as stop quote order. This change applies to buy and sell stop orders.
- Stop Limit Order –> Stop Quote Limit Order: All stop limit orders (buy and sell) will be renamed stop quote limit orders.
Stop quote vs. stop quote limit
As mentioned before, a stop quote simply gets triggered once the market price hits that specified stop quote. This can be either a buy stop quote or a sell stop quote depending on whether the current market price is above or below the specified stop.
Stop quote limit orders take this concept one step further by combining the aforementioned stop quotes with regular limit orders. The result is an order type triggers a buy when a certain market level is reached and at the same time imposes a limit on that buy order to cash in profits once a higher price level is reached.
Here’s a more illustrative example:
Let’s say the current market price of a given stock is $100. If I were to place a stop quote limit order at $110 with a limit at $120 the order would execute a buy when the price reaches $110. Once the price hits $120 this order would be sold again as it hit the limit.
Why stop quotes are important
Stop quotes and stop limit quotes can be an important tool in a trader’s toolbox when deciding at which price levels to buy or sell into the market. They allow you to automate certain processes without constantly following the market price.
Once a stop quote is put in place on Merrill Edge all you need to do is wait for that order to execute. Stop quote orders on Merrill Edge are by default not time-restricted, meaning they will never expire.
How to place a stop quote on Merrill Edge
Placing a stop quote order on Merrill Edge is a fairly straightforward process if you already know how to place a regular order with this broker. All you really need to change is the order type in the bottom left corner of the screen.
Here’s a step-by-step instruction on how to place a stop quote order on Merrill Edge:
- Navigate to you trading dashboard
- Select the stock or fund you would like place a stop quote with
- Click on the dropdown menu under ‘Order Type’ (Market will be selected by default)
- Select Stop Quote
- Specify the market price at which you want to buy/sell the security
- Excute the order as you usually would
- That’s it, your stop quote is now in place!
To sum up, a stop quote on Merrill Edge is just a different name for a stop order. If you are already familiar with how regular stop orders work then you can simply use Merril Edge’s stop quotes the same way.
If you were unsure about stop order and stop limit orders in general then I hope that this post helped to clarify what the difference is and how to apply this knowledge to trading with Merrill Edge. If you’d like to read more about this also make sure to check out my article on how to set a stop loss in Merrill Edge.
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