A stop limit order is an order to buy or sell a security at a specified price or better after the security reaches a specified stop price. A stop limit order is different from a regular stop order in that, once the stop price is reached and the order activates, the order becomes a limit order to buy or sell at the specified limit price or better.
A stop limit order can be used to help lock in profits or minimize losses. When buying securities, a stop limit order can be used to ensure that you don’t pay too much for the security.
When selling securities, a stop limit order can be used to ensure that you don’t sell the security for too low of a price.
A stop limit order can be placed with a broker by entering the following information:
Order type (buy or sell)
The stop price is the price at which the order will activate and become a limit order. The limit price is the maximum or minimum price that you are willing to buy or sell the security for.
Once the stop price is reached, the order will become a limit order and will only execute at the specified limit price or better.
It’s important to note that there is no guarantee that a stop limit order will fill at the desired price. This is because, once the stop price is reached and the order activates, it’s possible that the security will move quickly past the specified limit price.
In this case, your order may only partially fill or not fill at all.