What is stop-limit order?
An order that places a limit order on the book once the market reaches your trigger price, so you control both when it activates and the worst price you accept.
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In this entry
An order that places a limit order on the book once the market reaches your trigger price, so you control both when it activates and the worst price you accept.
It solves the main weakness of a plain stop, which becomes a market order and can fill far from the trigger during a fast move. The weakness it introduces is the mirror image: if price gaps straight through your limit, nothing fills and you keep the position you were trying to exit. Set the limit meaningfully beyond the trigger if certainty of exit matters more than price. See stop order and limit order.
Two prices, two decisions. Most mistakes with this order type come from setting them to the same number.
How it works
The trigger price arms the order. Until the market touches it, nothing is on the order book and nobody can see the instruction.
The limit price governs the order that appears afterwards. Once triggered, a limit order rests at that price and fills only at it or better, subject to whatever time in force you selected.
The gap between the two prices is the whole design. A narrow gap gives price precision and a high chance of no fill. A wide gap gives near-certainty of a fill at the cost of accepting a worse price. Setting the limit equal to the trigger is the narrowest possible gap and is why so many stop-limits sit unfilled while the market runs away from them.
Two further details are venue-specific and worth checking in the exchange's own order-type documentation. Which price triggers the order, since venues use last traded price, mark price, or index price and they diverge in volatile minutes. And whether the resulting limit order is treated as a maker or taker order for fee purposes, which depends on whether it rests or crosses. See maker taker fee.
Example
Illustrative figures. You hold a position at $100 and want out below $95.
| Trigger | Limit | Outcome |
|---|---|---|
| $95 | $95 | Rests at $95, never fills, position retained |
| $95 | $93 | Rests at $93, likely no fill in this move |
| $95 | $88 | Fills near $88, loss realized |
The third row is what a stop-market would have done anyway. The value of the stop-limit is not in this scenario. It is in the ordinary case where the market drifts through $95 with normal depth and you fill at $94.90 instead of the $89 a market order might have taken during a brief gap.
Why it matters when you buy
Order type is the lever you control over execution price, and the right choice depends on how thin the market is. The liquidity pages show measured spread and depth per venue and asset, which is the input to deciding how far to set the limit. The guide on limit and market orders covers the basic trade-off.
Related terms
- stop order — the plain version that becomes a market order
- limit order — the order this creates on trigger
- take profit order — the upside counterpart
- time in force — how long the resulting order lives
- slippage — the cost this order type is avoiding
- trailing stop — a trigger that follows the market
Questions
How far apart should the trigger and limit be?
Far enough to cover a normal move on that market, which the measured spread and depth indicate. On a thin market that gap needs to be wider, which is exactly when the order type is least useful.
Does it cost more than a market order?
Fees depend on whether the resulting order rests or crosses. A resting fill is charged at the maker rate on most venues, which is usually lower. See maker taker fee.
Can I attach one to an existing position?
Many venues allow it, and some let you attach a stop and a take-profit together so that whichever triggers first cancels the other. The feature and its name vary by exchange.