Stop Limit Order
As per the SEC definition: 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, a stop-limit order becomes a limit order that will be executed at a specified price (or better). The benefit of a stop-limit order is that the investor can control the price at which the order can be executed.
A few points about stop limit orders:
- The stop price for buy orders is placed above the current market price.
- The stop price for sell orders is placed below the current market price.
- The stop price does not need to be the same as the limit price.
- The trade is not guaranteed to be executed if the stock/commodity does not reach the stop price.
- The investor has much greater precision in executing the trade.