Explain the Use of Limit Orders and Stop-Loss Orders in Rebalancing

question 33

Essay

Explain the use of limit orders and stop-loss orders in rebalancing an investor's stock portfolio. What are the principal risks in using these orders?

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Definitions:

Confidence Level

A confidence level is a statistical parameter that expresses how certain one is in the results of a statistical experiment, often represented as a percentage that quantifies the probability that the true parameter lies within the confidence interval.

Population Standard Deviation

The population standard deviation is a measure of the dispersion or variation of all members in a full set or 'population' of data.

Maximum Allowable Error

The largest error that is tolerated in the measurement process, beyond which the measurement is considered unacceptable.

Confidence Level

The percentage or level of certainty that a statistical parameter lies within a specific interval.