A TYPICAL INVESTMENT TRANSACTION 159
interest. Some months before, Jones had bought 100 shares of
U. S. Steel common stock as an investment. Since that time
the dry goods business which he conducts in Baltimore has
grown so rapidly that funds for its expansion are now urgently
needed. Jones had noticed that his Steel common was selling
at about 150—that is, at $150 a share—and has decided to sell
his shares and put the money into his business. Accordingly,
he went to his bank, obtained his stock certificate from his safe
deposit box, and took it over to the office of Jenkins & Co., his
brokers, where he now stands over the ticker. After again
satisfying himself by glancing at the tape that U. S. Steel is
selling at 150 or better, Jones decides to sell at once and pre-
pares a selling ticket.
There are several different ways in which he can make his
order out, depending, of course, upon his exact wishes regard-
ing the sale of his stock. If Jones indicates a definite price at
which he will sell his stock, the order is called a “limited” order,
and can be executed only at or above the price designated.’
But if no price limit is set, it is called a “market” order, and
is executed at the most advantageous price obtainable in the
market at that particular time.
Usefulness of the Stop-Loss Order.—Jones might wish
to place a stop-loss order, so as to limit any losses which he
might encounter in the stock he purchases. He might, for
example, at the time he gave an order to purchase 100 Ameri-
can Sugar at 85, also order his broker to sell that amount “on
stop” at 80, in order to limit his loss to around 5 points on the
stock so purchased. A stop-loss order is a limited order until
the limit is reached, when it becomes a market order. For
example, until Sugar sells down to 8o it is not executed, but
once this stock has descended to this price, the order becomes
an active market order calling for immediate execution.
2A limited order to buy would of course be executed only at or below the price
