Stop-Limit Order

A Stop-Limit Order is a type of order used in trading that combines the features of a stop order and a limit order. It sets two price points: the stop price and the limit price. When the market price reaches the stop price, the stop-limit order is activated and becomes a limit order, which will only be executed at the limit price or better.

For example, if a trader wants to buy a Stock that is currently priced at $50, but only if it starts to rise, they might place a stop-limit order with a stop price of $52 and a limit price of $54. If the stock reaches $52, the order becomes a limit order to buy the stock, but it will not execute at a price higher than $54.

In another scenario, a trader holds shares of a stock currently priced at $100 and wants to protect against losses. They might set a stop-limit order with a stop price of $95 and a limit price of $93. If the stock price drops to $95, the order becomes active, but it will only sell the shares if the price is $93 or higher.