Stop limit price
Family XII · Other terms
Not to be confused with limit order, stop order, stop market order.
Stop limit price is the second price parameter in a stop-limit order, following the stop price. Once the stop price is touched, the order turns into a limit order at the stop limit price, which caps the execution price but does not guarantee a fill. It is distinct from the stop price, which only triggers the order.
Role in a stop-limit order
A stop-limit order contains two prices: the stop price and the stop limit price. The stop price is the trigger; when the market reaches it, the order becomes a limit order at the stop limit price. The stop limit price therefore controls the maximum price paid (for a buy) or the minimum price accepted (for a sell) after activation. If the market moves past the stop limit price without trading at it, the order may remain unfilled.
Worked example
An investor holds shares trading at 50.00 and wants to limit losses. They place a sell stop-limit order with a stop price of 48.00 and a stop limit price of 47.50.
If the market gaps down to 47.40 and never trades at 47.50 or higher, the order remains unfilled. The stop limit price thus protects against selling too low but introduces the risk of no execution.
Practical considerations
The distance between the stop price and the stop limit price affects the likelihood of execution. A stop limit price close to the stop price reduces slippage but increases the chance of no fill; a wider gap increases the chance of a fill but may result in a worse price. Some markets or brokers may not support stop-limit orders, and order handling rules vary by venue and regulator.
Often confused with
- limit order
- A limit order is a single-price instruction to buy or sell at a specified price or better, whereas a stop limit price is the second price in a stop-limit order that only becomes active after a trigger; the visible sign is that a limit order has one price, while a stop-limit order shows both a stop price and a stop limit price.
- stop order
- A stop order (or stop-market order) becomes a market order when the stop price is reached and executes at the best available price, while a stop limit price converts the order into a limit order at a specific price; the visible sign is that a stop order has only a stop price, whereas a stop-limit order lists a stop price and a stop limit price.
- stop market order
- A stop-market order triggers a market order at the stop price and guarantees execution but not price, while a stop limit price sets a limit price after the stop is triggered and guarantees price but not execution; the visible sign is that a stop-market order has no limit price, only a stop price.