What is a Stop Limit Order?
The following text comes from our post “What is the Difference in Order Types” Check it out for the definitions of other order types!
A stop limit order is the combination of all the order types and can be used to buy or sell a security.
Buy Stop Limit Order
A buy stop limit order is set to trigger a purchase if the shares reach a certain price, but your purchase price is limited based on your set limit.
Continuing on with our example. If you set a Buy stop limit order at $83.00, but a limit price of $83.50, you will execute a buy order if the share price rises above $83.00 but stays below $83.50. If the price gaps up to $84.00 per share, you will not purchase any shares until the price drops to $83.50 or under.
For a buy stop limit order, the stop price should be set above the current market price and the limit price at or above the stop price.
Sell Stop Limit Order
A sell limit order is set to trigger the sale of shares if a certain price is reached as long as the share price remains above your limit price.
In our example if you set a sell stop limit order with a stop at $82.00 and a limit at $81.50, you will sell your shares if the price drops below $82.00 and remains above $81.50. If the price of the security instantly drops below $81.50, your shares will not be sold until the share price rises back up to $81.50.
For a sell stop limit order, the stop price should be set below the current market price and the limit price at or below the stop price.
