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Stop-limit order

A stop order that becomes a limit order, not a market order, when triggered; safer on price, riskier on getting filled.

When the stop price is hit, a stop-limit order places a limit-order at the limit price you specify. If price blows through the limit without trading there, you are not filled and are still in the trade.

It protects against extreme slippage at the cost of protection failing exactly when you need it most. Many traders use it for entries and a plain stop-order for exits.

Example: sell stop at $50.00, limit at $49.80. If price trades $50.00 and ticks down to $49.85, you fill. If a headline gaps it straight to $47, your order sits unfilled at $49.80.

Related: stop-order, limit-order, stop-loss, slippage

See it drawn

Original diagrams for the ideas on this page. Illustrative, not real market data.

Slippage on a market orderA buy order clears four price levels, so the average price paid is worse than the price first quoted.Buy 1,000 shares at marketpricesell orders resting (bar length = size)20.04300 shares20.03200 shares20.01200 shares20.00300 sharesnothing resting at 20.02order sweeps up the bookaverage fill 20.02SLIPPAGE0.02 a share$20.00 in totalintended 20.00Each level fills at its own price; the average is what you really paid.
Slippage on a market order. You click at 20.00, but only 300 shares are resting there, so the rest of the order fills at 20.01, 20.03 and 20.04. The average price paid is 20.02, and that two-cent gap is slippage.

Educational only, not advice. Spotted an error? Post in Site Feedback.