Can You Set a Stop Loss on Fidelity?

Fidelity is a well-known brokerage firm offering a range of investment products and services, including stocks, bonds, ETFs, and mutual funds. For many investors, managing risk is a key aspect of trading, and setting a stop loss order is a common strategy to help with this. In this article, we'll delve into what stop loss orders are, how they work, and how you can set them up using Fidelity's trading platform.

What is a Stop Loss Order?

A stop loss order is a type of order placed with a broker to buy or sell once the price of the asset reaches a certain level. The primary purpose of a stop loss is to limit an investor's loss on a position.

Types of Stop Loss Orders:

1. Standard Stop Loss Order: This order automatically sells a security when its price falls to a specified level. This is a straightforward method to prevent further losses.

2. Stop Limit Order: This order becomes a limit order once the stop price is reached. It is different from a standard stop loss order because it specifies the price at which you want to sell the security, potentially preventing the sale from occurring if the price falls too quickly.

3. Trailing Stop Loss Order: This order allows the stop price to adjust as the price of the security moves in a favorable direction. It helps lock in profits as the security price increases.

How Stop Loss Orders Work

When a stop loss order is placed, it remains inactive until the market price reaches the stop price. At this point, it becomes a market order (in the case of a standard stop loss) or a limit order (in the case of a stop limit).

Setting a Stop Loss on Fidelity

Fidelity offers a user-friendly platform for setting stop loss orders. Here’s a step-by-step guide to setting a stop loss order on Fidelity:

1. Log In to Your Fidelity Account: Access your account by logging in on the Fidelity website or app.

2. Navigate to the Trading Section: Go to the "Trade" tab in the main menu.

3. Select the Security: Choose the security you wish to set a stop loss for by entering the ticker symbol.

4. Choose Order Type: Select the type of order you want to place. For a stop loss, you would typically choose "Sell" and then select "Stop Loss" or "Stop Limit."

5. Enter Stop Price: Input the stop price at which you want the order to trigger. For a trailing stop loss, you will also need to specify the trailing amount or percentage.

6. Review and Confirm: Double-check all the details and confirm the order. Fidelity will execute the stop loss order once the specified conditions are met.

Advantages and Disadvantages

Advantages:

• Risk Management: Helps limit potential losses.
• Automation: Orders are executed automatically when the price reaches the stop level, removing the need for constant monitoring.

Disadvantages:

• Slippage: In volatile markets, the actual execution price may be different from the stop price.
• No Guarantees: A stop loss does not guarantee execution at the stop price, particularly in fast-moving markets.

Conclusion

Setting a stop loss on Fidelity is a straightforward process that can help manage investment risk. By using Fidelity’s platform, investors can take advantage of various types of stop loss orders to protect their investments. However, it’s important to understand the potential limitations and risks associated with stop loss orders and to use them as part of a broader risk management strategy.