Stop Limit finance definition

A stop limit order is a type of order used in trading to buy or sell a security once it reaches a specified price, but with a limit on the price at which the order will be executed. It combines features of both a stop order and a limit order.

Here’s how it works

Stop price: You set a stop price (or trigger price). This is the price that will activate the order, causing it to become a live order in the market.
Limit price: After the stop price is reached, the order becomes a limit order, meaning it will only be executed at the limit price or better.

Example

Suppose you’re holding a stock, and you want to sell it if it starts falling, but only if you can get a good price.
You set a stop price at $50 and a limit price at $49.
- If the stock price falls to $50 (or below), the order will trigger and become a sell limit order.
- However, the stock will only be sold if the price is at $49 or higher. If the stock price falls too quickly and can’t find a buyer at $49 or better, the order will not be filled.

Key Points

Protection: A stop limit order helps protect against excessive loss while ensuring that you don’t sell below a certain price.
Risk of non-execution: Unlike a regular stop order (which becomes a market order and is guaranteed to execute once triggered), a stop limit order can fail to execute if the price moves too quickly or if there’s no buyer/seller at your limit price.

Stop Limit Order

Here’s how it works

Example

Key Points

Information on Other Interactive Brokers Affiliates

Interactive Brokers Canada Inc.

Interactive Brokers Australia Pty. Ltd.

Interactive Brokers Hong Kong Limited

Interactive Brokers India Pvt. Ltd.

Interactive Brokers Securities Japan Inc.

Interactive Brokers Singapore Pte. Ltd.

Here’s how it works

Example

Key Points

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