Stop Limit Order
A stop order that becomes a limit order instead of a market order when triggered.
Also called: stop limit
Written by Javier Sánchez Ros
In plain language
A stop limit has two prices: the stop, which arms the order, and the limit, which caps how bad a fill you will accept.
It solves the slippage problem and creates a worse one. If price blows straight through your limit, the order sits unfilled while the position keeps losing.
It is well suited to entries, where missing a fill is merely disappointing, and poorly suited to protective exits, where not filling is the disaster.
Worked through
A stop-limit at $92 trigger, $91.50 limit, on a day the stock falls to $80
- Trigger
- $92.00
- Limit
- $91.50
- Prices traded
- $92.00 → $80.00
- Position at the close
- still open
The trigger fired correctly at $92 and placed a limit order to sell at $91.50 or better. Price went straight through and never came back, so the limit sat unfilled while the stock fell another $11.50 with the trader still fully exposed.
That is the trade-off in one line. A stop-limit protects you from a terrible fill by accepting the possibility of no fill at all, and no fill is unbounded. A plain stop guarantees the exit and accepts whatever price the market offers, which is bounded by the exit happening.
Which one is right depends on why the order exists. For taking profit, or entering on a breakout, a limit is sensible: missing the trade costs you an opportunity. For protection it is usually the wrong instrument, because missing the exit costs you the account.
The failure mode is especially cruel because the order looks like it is working. It is live, it is visible on the platform, and it will keep being visible all the way down.
Why it matters
On a protective stop you are choosing between a bad fill and no fill. In a genuine crash, no fill is far more expensive.
Common mistakes
- Using a stop limit as a protective stop and being left holding a position through a gap.
- Setting the limit price identical to the stop price, which makes a fill unlikely in a fast move.
Keep exploring
These concepts are connected. Understanding one usually makes the next one easier.
A dormant order that becomes a market order once price reaches a trigger level.
A predefined exit that closes a losing trade before the loss becomes serious.
An order to buy or sell at a specified price or better — it may not fill at all.
The difference between the price you expected and the price you actually got.
A jump between one period’s close and the next period’s open with no trading in between.