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.