How to set a trailing stop on Wealthsimple?

One of the most painful things in stock trading is finding out that you could save yourself from losses or make more profit if you sell your holdings earlier. But because you're not present at the time when stock is at a higher level, you couldn't. This is one of the reasons that brought about the invention of different automated stock selling options or order types.

Below are some of the common automated order types for selling stock holdings used by veteran traders:

• Market Order allows you to buy and sell your preferred stock at the best available price.
• Limit Order is an order type that lets you buy or sell stock at a better price. This order type executes a buy or sell order at the exact price level you select.
• Stop Limit Order lets you select a price point that you wish to buy a stock and another price you wish to sell it. For example, If a stock is at $100 and you think it'll soon increase. You can place a stop-limit order by setting a stop price at $105 and a limit order at $110. This means that when the price of the stock increased to $105 your stop order will be executed by buying the stock. When the stock also reached $110 the limit order will be executed by selling the stock. 
• Trailing stop order is my favourite of all because it allows you to set a stop order below the market value with an attached 'trailing' amount. This means that as long as the market price of your stock increases, the stop order amount increases. However, if the market value decreases, the stop order will be initialized.

So, Wealthsimple has a stop limit buy and stop limit sell feature.

The former consists of placing a stop-limit buy order for ten shares of Acme International at $10 and set the top price at $15 and the limit price at $20. If the stock hits $15, your order will convert to a limit order with a limit price of $20.

It is the opposite with a stop limit sell. Shares are trading at $20 and you want to create a stop limit sell order for ten shares of Acme International at $15 and the limit price at $10. Once the stock hits $15, your order will be converted to a limit order with a limit price of $10.

The trailing stop loss for long-term investment is a great strategy to protect your profits.

Meanwhile, you cannot trade options on Wealthsimple. But you can purchase exchange-traded funds (ETFs) on the trading platform that specialize in covered call option strategies.

Stop-Loss vs. Stop-Limit Order Vs. Trailing stop order

When you trade stocks, options, or futures, it's important to know how to protect yourself from losses.

A stop-loss order is an order that goes into effect when the price of security hits your specified trigger point. It will automatically sell at the market price once that point has been hit.

Stop-loss orders may be beneficial to any investor.

A stop-loss is a mechanism that restricts an investor's loss on a security position if the position's value drops significantly.

One of the most significant benefits of using a stop-loss order is that it does not require checking your assets regularly.

However, a disadvantage is that a price swing may cause the stop to go live, triggering an unneeded sale.

A stop-limit order goes into effect when a stock hits your trigger point and becomes a limit order for a specific dollar amount above or below the triggering price.

The idea behind these orders is to prevent further losses while allowing potential profits to be realized if prices recover in subsequent trading sessions.

However, some critical differences between them can make one more appropriate than another, depending on what you're trying to achieve with your investment strategy and goals.

Trailing stop order allows you to set a stop order below the market value with an attached 'trailing' amount. It means that as long as the market price of your stock increases, the stop order amount increases. However, if the market value decreases, the stop order will be initialized.

How to set a trailing stop on Wealthsimple?

A stop-limit buy and a stop limit sell option are available with Wealthsimple.

A stop-limit buy-the first strategy is to purchase 10 shares of Acme International for $10 each and set the top price at $15, with the limit price at $20. If the stock rises to $15, your order will be converted to limit order with a limit price of $20.

On the other hand, a stop-limit sell is exactly what it implies: a stop-limit sell. You want to establish a stop-limit sell order for 10 shares of Acme International worth $15 and the maximum price at $10. When the stock reaches $15, your order will be changed to limit order with a limit price of $10.

The trailing stop loss for long-term investing is a useful tool for safeguarding your gains.

Meanwhile, you won't be able to trade options on Wealthsimple. However, on the trading platform specializing in covered call option strategies, you may buy exchange-traded funds (ETFs).