Stop-Limit Order
Definition
A stop-limit order combines a stop trigger price and a limit fill price. When the market reaches the stop price, a limit order is activated at the limit price. This protects against extreme slippage (the order won't fill worse than the limit) but risks no fill if price gaps past the limit. Different from a standard stop-loss, which becomes a market order on trigger.
In-depth: Stop-Limit Order
Stop-limit orders extend the basic stop-loss concept by adding a fill-price constraint. Where a standard stop-loss becomes a market order on trigger (filling at the best available price, potentially with significant slippage during fast markets), a stop-limit becomes a limit order on trigger (filling only at the limit price or better).
Mechanics: 1. Place stop-limit with stop price S and limit price L 2. Order remains pending while price is on the safe side of S 3. When market reaches S, the order activates as a limit order at price L 4. Order fills only if price is at L or better; if price moves past L without filling, the order remains pending (or expires per time-in-force)