Definition
A stop-limit order separates the condition for entering the market from the acceptable execution price. The stop price determines when the order activates, while the limit price sets the highest purchase price or lowest sale price permitted. It can be used for entry or exit, depending on the order’s direction and purpose.
How It Works
Suppose an asset trades at 100 and a hypothetical sell order has a stop of 95 and limit of 94. Once the trigger is reached, a sell limit order at 94 is submitted. It can execute at 94 or better, but if available bids have already fallen below 94, it may remain unfilled despite having triggered.
Key Considerations
The limit controls execution price, not the amount of loss a position can suffer while waiting. Trigger references, order validity, and balance checks vary by platform. Check both prices and whether sufficient assets or margin remain at activation; a triggered order is not the same as a completed trade.