Definition
A stop-limit order combines the features of a stop order and a limit order. When the stop price is reached, instead of becoming a market order, it becomes a limit order at a specified limit price. This gives traders more control over execution price but adds the risk that the order may not fill if the market moves too quickly past the limit price. Stop-limit orders require setting both a stop price (trigger) and a limit price (maximum/minimum acceptable execution price).
Example
You own stock at $100 and set a stop-limit with stop at $90 and limit at $88. If the price drops to $90, a limit order at $88 is placed. If the stock gaps down to $85, your order won't execute because the price is below your $88 limit.
FAQ
What is Stop-Limit Order?
An order combining stop and limit features, becoming a limit order when the stop price is triggered.
Why is Stop-Limit Order important?
Stop-Limit Order helps investors evaluate trading mechanics and make more informed decisions.