what is stop limit order?

Answer 1

The answers above are very good. I would like to add also that usually I explain to people a standard stop order as a stop-market order. Once the stop is triggered, the order becomes a market order-naturally a buy stop is placed above the market, generally to protect a short position or buy once you feel a resistance point has been penetrated, and a sell stop is below the market, usually to protect a long position or sell short once you feel a certain support has been penetrated. Naturally, then, stop-limits are the same except that they become a limit order once that price is penetrated but as Mike stated above, it must trade back through that price with size. So, if you have a buy-stop-limit at 50, and the stock prints at 50, the order becomes a buy at 50 or better. Limit orders are really a form of negotiation. Think of a limit order as standing in a line-if it is moving fast your order may never get filled because the next print was 50.05, or maybe it was 50 but it was only for 100 shares and someone else was ahead of you in line. Conversely, if your order was an all-or-none order that was above the amount offered at that point in time, say for 2000 shares, then it would trade around it as well and you wouldn't get filled.

An interesting pneumonic is:
SLoBS Sell-Limits and Buy-Stops (Limit) above the market

-market price-

BLiSS Buy-Limits and Sell-Stops (Limit) below the market

On a long position sell limits are often called take profit points and sell-stops are called stop losses. A limit doesn't have to be on the respective side of the market either, if a stock is quoted at 45.55-45.57 and is moving fast, I may put in a buy limit at 45.58, essentially saying hey, Im willing to pay a little more but I do not want to just put out a market order and get filled at 46. By the time it is entered the quote might be 45.59-45.60-in this case I would not get filled but I would still be in line behind the bidder at 45.59, unless the order was immediate or cancel -or- fill or kill.

Answer 2

Stop-Limit Order

A stop-limit order is an order to buy or sell a stock that combines the features of a stop order and a limit order. Once the stop price is reached, the stop-limit order becomes a limit order to buy or to sell at a specified price.

The benefit of a stop-limit order is that the investor can control the price at which the trade will get executed. But, as with all limit orders, a stop-limit order may never get filled if the stock's price never reaches the specified limit price. This may happen especially in fast-moving markets where prices fluctuate wildly.

The use of stop limit orders is much more frequent for stocks that trade on an exchange than in the over-counter (OTC) market. In addition, your broker-dealer may not allow you to place a stop limit order on some securities or accept a stop limit order for OTC stocks. Before you enter into this type of order, you should speak to your broker or financial advisor about how the order works.

Answer 3

It is an order to buy or sell a stock -- but only when a certain price thresh hold is hit.

For example, suppose you bought a stock at $38 and the price is now at $63. You know that something is about to happen that will wither cause the price to jump up or fall quickly. If you don't like the uncertainty -- you could sell the stock. Or you could put in a stop sell order at $60. I things go well, the stock does not drop in value and you reap the rewards.

If the price drops, then as soon at it hits $60 -- the specialist has to stop all trading and execute your trade next. It could be well below $60 -- but will usually be at $60.

Answer 4

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