Stop-Limit Orders

A stop-limit order combines a stop order and a limit order. It has two prices: a stop price that activates the order, and a limit price that sets the worst price you will accept once it is active. When the market trades at your stop price, the order becomes a limit order at your limit price. It protects you from bad fills, but in exchange it can leave you without a fill at all.

How it works#

That second case is the central risk: a stop-limit can fail exactly when you most need protection.

Stop vs stop-limit compared#

Choosing the stop and limit prices#

• Stop price: where your trade idea is wrong, as with any stop. See Stop Loss Strategies.
• Limit price: how much slippage you will accept. A limit very close to the stop is likely to be skipped in a fast move. A limit further away fills more reliably but allows more slippage.

A common approach is to set the limit a set distance beyond the stop, such as a fraction of the asset's average true range, so it fills in normal conditions but not in a disorderly crash.

When stop-limit orders make sense#

• Entering breakouts. A buy stop-limit at $45.10 with a limit at $45.40 enters a breakout but refuses to chase a sudden spike to $47.
• Thin markets where a plain stop could fill at an absurd price on a brief air pocket.
• Situations where no exit is acceptable, for example a long term holding where you would rather hold through a flash crash than sell at a panic price.
• Venues that require them. Some crypto exchanges and extended hours sessions accept only limit based orders.

When they are dangerous#

• As your main protective stop on a leveraged position, where failing to exit can cause losses far beyond plan.
• Around earnings and major news, where prices can gap straight past both your stop and limit.
• During halts, after which a stock can reopen far below your limit. See Trading Halts and Circuit Breakers.

Stop-limit orders in crypto#

Many crypto exchanges offer stop-limit as the default stop type. Because crypto trades around the clock and can drop several percent in seconds during liquidation cascades, a tight limit can easily be skipped. Some exchanges also offer stop-market orders; know which you are placing.

Frequently asked questions#

What is the difference between a stop order and a stop-limit order?#

A stop order becomes a market order when triggered, guaranteeing an exit but not a price. A stop-limit becomes a limit order, guaranteeing a price but not an exit.

Can a stop-limit order not execute?#

Yes. If the price moves past your limit before the order can fill, it remains unfilled and you keep the position.

What limit price should I use?#

Far enough beyond the stop to fill in normal conditions but close enough to block extreme fills, often a small multiple of typical tick movement or a fraction of the ATR.

Sources#

• U.S. Securities and Exchange Commission, Stop limit order