Stop limit order
Family II · Orders
Not to be confused with stop loss, limit order, stop order.
Stop limit order is a conditional order type with two prices: a stop price that activates the order and a limit price that caps the execution price. When the market reaches the stop price, the order becomes a live limit order at the limit price. It offers price control after activation but carries the risk that the limit price may never be filled.
How it works
A stop limit order rests in the order book as inactive until the stop price is touched or crossed. At that moment, it is converted into a limit order at the limit price. The limit price can be the same as the stop price or different, depending on the trader's instruction.
For a sell stop limit order, the stop price is usually placed below the current market price; for a buy stop limit order, above it. The limit price must be set so that the resulting limit order is marketable or likely to be filled. If the market gaps through the limit price, the order may remain unfilled.
Worked example
An investor holds a stock trading at 52.00 and wants to limit losses while avoiding a sale at an unexpectedly low price. They place a sell stop limit order with a stop price of 50.00 and a limit price of 49.50.
If the market instead gaps from 50.00 straight to 49.00, the limit order at 49.50 will not fill unless the price recovers to 49.50 or higher.
Uses and risks
Stop limit orders are used when a trader wants to exit a position after a certain loss but refuses to accept a price worse than a specified limit. The main risk is non-execution: a fast market can jump past the limit price, leaving the position open. Some brokers may also reject a stop limit order if the stop and limit prices are set on the wrong side of the market.
Rules on order types, price bands and allowable stop distances vary by broker, exchange and regulator.
Often confused with
- stop loss
- A stop-loss order becomes a market order when triggered and guarantees execution but not price, whereas a stop limit order becomes a limit order and guarantees price but not execution; the visible difference is the presence of a separate limit price alongside the stop price.
- limit order
- A limit order is active immediately and rests in the book at a specified price, while a stop limit order remains inactive until a stop price is reached; the visible difference is the extra stop price that delays activation.
- stop order
- A stop order (often called a stop-market order) triggers a market order at the stop price, while a stop limit order triggers a limit order at a separate limit price; the visible difference is that a stop order has only one price, the stop price, and no limit price.