Stop Limit Order

A stop limit order is a combination of a stop order and a limit order. Like a regular stop order, it is triggered when the market price hits a specific stop price.

However, instead of becoming a market order, it becomes a limit order at a specified limit price. This provides the trader with more control over the execution price.

It prevents the order from being filled at a potentially unfavorable price during periods of extreme slippage. The trade-off is that there is no guarantee the order will be filled if the market moves rapidly past the limit price after the stop is triggered.

This type of order is preferred when a trader wants to manage risk but requires price certainty when exiting or entering a position.