How Much Stock to Buy and How to Buy It 55 The buy limit order tells your broker to purchase XYZ Company's stock only when it drops to a certain price, which in your case is $8. You will also probably want to use a notation to tell your broker how long you are willing to wait for the price to drop: a day, a week, or a month. You do this, of course, believing that the value of the stock will eventually go back up. So your investment strategy is to buy as if the stock is on momentary sale. On the other hand, if you currently own XYZ stock valued at $8 and you believe its price is going to go up and then later drop, you will want to give your broker a sell limit order. By doing so, you tell the broker to sell your stock only if the price rises to $10. Of course, you are assuming that the price of XYZ stock will later drop and remain below the price of $10. This is called getting out when the going's good. Caution Be warned that the type of timing necessary to successfully manipulate limit orders doesn't come quickly or easily. New investors are strongly urged to consider the pitfalls in this type of trading before attempting it. Stop Orders The other side of the limit order is the stop order. By using a stop order, an investor limits fluctuation of the price at which he or she is willing to own the stock. Or, in other words, the stop order is used to keep an investor from losing money he or she has already made on long and short positions. Long: --A long position simply means that an investor owns a share of stock outright and has full rights as pertain to that ownership. Short: --A short position means that an investor has sold stock that he or she has borrowed with the intention of returning the stock by repurchasing it at a later time when the price of the