Which one of the following market tools is used to limit downside risk in the price of a stock?
A)Stop order
B)Market order
C)Limit order
D)Deferred sales order

Question

Quizplus · Accepted Answer

A stop order is used to limit downside risk by triggering a sale of the stock at a certain price point (the stop price) to prevent losses in case the stock price falls below that point. It helps investors to protect their gains or limit their losses. Market orders and limit orders do not provide protection against downside risk. Deferred sales orders are not a commonly used market tool.

Which One of the Following Market Tools Is Used to Limit