A Stop Limit Order is a type of order that combines the features of a stop order and a limit order. It becomes active once a certain price, known as the stop price, is reached. Once active, it behaves as a limit order and will only be executed at the limit price or better.
Carol wants to buy BCH, but only if a bull run is confirmed. She sets up a stop limit buy order with the stop set at $1000 USD/BCH, currently the price is at $800 USD/BCH. Carol's order will not execute until the price reaches $1000 USD, at which point it becomes a limit order. The order will only be filled at $1000 USD/BCH or a better price.
Carol wants to set up a stop loss order as insurance against the price drastically dropping while she is on vacation. She sets up a stop limit sell order for her 5 BCH at $699 because she believes that if the price drops below $700 it will go down even further. If the price hits $699, Carol's stop loss will execute and a limit order selling 5 BCH will be placed. The order will only be filled at $699 USD/BCH or a better price.
Stop Limit Orders provide traders with more control over the buy and sell prices. They can be used to protect profits, limit losses, and initiate new positions when the market breaks out.
"Stop Limit Orders are a useful tool for traders. They can be used to protect profits, limit losses, and even initiate new positions when the market breaks out."
While Stop Limit Orders can be beneficial, they also come with risks. The order may not be executed if the market price does not reach the stop price or if the market price surpasses the limit price before the order can be filled.
"While Stop Limit Orders can be a useful tool, they come with risks. The order may not be executed if the market price does not reach the stop price or if the market price surpasses the limit price before the order can be filled."
* All terms and definitions may update as the Cryptionary improves.
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