Question

Buy stop orders can be used for all of the following reasons EXCEPT:

A. to protect a profit on short positions
B. to limit loss on short stock positions
C. to acquire stock if a support level is broken
D. to acquire stock if a resistance level is broken

Answer 1

C.

Step-by-step explanation:

Buy stop orders can be used for all of the following reasons except to acquire stock if a support level is broken. This is because Buy-Stop orders (also known as stop loss) are meant to limit the losses that you may incur in a bad position trade and can also be used to take advantage when a resistance level is broken, but not when a support level is broken. When supports are broken most buy stop orders will sell you out of your position to prevent further loss, if set up correctly.