Stop-loss vs stop-limit orders: What are they and how do you use them? FXCM Markets

set limit price

Stop-limit orders are a conditional trade that combine the features of a stop loss with those of a limit order to mitigate risk. FXCM Markets is not required to hold any financial services license or authorization in St Vincent and the Grenadines to offer its products and services. If you chose a market execution order, you would only pay the commission once. Liquidity is likely to increase as the price nears these levels. A horizontal line on the stock chart is one of the tools that can help you identify these points.

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Ask price falls to your stop price, it triggers a sell limit order. So you may pay a minimum order fee to your broker for each trade. Your stop-limit order may get filled in three separate trades over multiple days due to the lack of liquidity.

Stop Limit Order: How To Use In Crypto?

That order then turns into a market order — actively trading on the market right away. Suppose that your technical analysis tells you an uptrend might start if the market breaks above $310. You decide to use a buy stop-limit order to open a position, in case the breakout happens. You set your stop price at $310 and your limit price at $315.

combines the features

The stop price is the first target price you set, and the limit price is the preferred price mark off the target price range. Another crucial parameter is the time frame outside which the order can’t be filled. If the price doesn’t make it beyond the stop price mark in the chosen time frame, the order is not filled. Please note that your order will be executed as a limit order ADA after the market price reaches your limit price.

#2 Stop-Limit Order Strategy: Consider the Stock Volatility When Setting Your Limit

Keep in mind, short-term market fluctuations may prevent your order from being executed, or cause the order to trigger at an unfavorable price. For example, if the market jumps between the stop price and the limit price, the stop will be triggered, but the limit order will not be executed. If there aren’t enough contracts in the market at your limit price, it may take multiple trades to fill the entire order, or the order may not be filled at all.

Can you do a stop loss and limit sell?

Yes, as far as the market is concerned, you can submit a limit order to sell at a good price and stop-loss to sell the same asset at a bad price.

A stop price and a limit price are then set once the trader specifies the highest price they are willing to pay per stock. The stop price is a price that is above the market price of the stock, whereas the limit price is the highest price that a trader is willing to pay per share. If the stock is volatile with substantial price movement, then a stop-limit order may be more effective because of its price guarantee.

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If the price drops below $19,700, then the limit order is activated, and you sell your BTC at a price higher than $19,500. But if the price reaches the $21k mark on time, the stop-limit order becomes a limit order with a limit set at the $21,200 mark so that you won’t pay for your BTC too much. If the BTC price grows too fast and gets beyond $21,200, the order is not filled. If everything goes well, you buy BTC for a price between $21,000 and $21,200.

Stop-limit orders can guarantee a price limit, but the trade may not be executed. This can saddle the investor with a substantial loss in a fast marketif the order does not get filled before the market price drops through the limit price. Both types of orders can be entered as either day orders or good-’til-canceled orders. A stop-limit order refers to a conditional order type used by investors and traders to mitigate risk. The order, which combines the features of both a stop and limit order, provides more precision over the desired execution price, helping to lock in profits and limit losses.

If the stock falls at or below this price, it triggers a market sell order. If the stop price is reached, but the trade cannot be executed at the limit price or better, the trade will not occur. Of course, there is no guarantee that this order will be filled, especially if the stock price is rising or falling rapidly.


They can select the limit price at which they’re willing to buy or sell. The stop-limit order triggers a limit order when a stock price hits the stop level. So say XYZ is trading at $8 and you set a limit order to buy 1,000 BTC shares at a limit of $8.20.

Buy Simulated Stop- Orders become limit orders when the last traded price is greater than or equal to the stop price. Sell Simulated Stop-Limit Orders become limit orders when the last traded price is less than or equal to the stop price. Study the volatility of the asset you’re placing a stop-limit order on. The order status will be displayed as if your order is triggered.

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For more information read the Characteristics and how to set stop limits of Standardized Options, also known as the options disclosure document . Alternatively, please contact IB Customer Service to receive a copy of the ODD. Before trading, clients must read the relevant risk disclosure statements on our Warnings and Disclosures page. Trading on margin is only for experienced investors with high risk tolerance.

«This type of order gets one last chance to fulfill before it’s canceled without any execution. It helps protect against whipsaws and sudden spikes — especially on highly volatile stocks.» If you try to sell a position using a market order on a thinly traded stock, you can get filled 10%, 20%, or more away from the current market price. This type of order can be super helpful for day traders and swing traders who can’t watch the markets all day. And they can be especially useful for stocks with thin trading volume, such as penny stocks. Options involve risk and are not suitable for all investors.

Stop and stop- orders are both tools traders use to manage risk, but they are not the same. A stop-limit order is implemented when the price of stocks reaches a specified point. If shares of XYZ decline to the stop price of $60, the 100 shares of XYZ will be sold as long as a minimum price of $58.50 can be obtained.

Stop-limit orders can be useful for active traders, especially those who trade penny stocks. If you set your limit too tight, you’re less likely to get a fill. If you set your limit too loose, you might pay a bad price. Now, when the stock trades below $10 and triggers your stop, there are no buyers and the price quickly plummets to $9.60.


To prevent losses, you decide to use a stop-limit order to sell BNB if the price drops back to your entry. You set up a sell stop-limit order with a stop price of $289 and a limit price of $285 . If the price reaches $289, a limit order to sell BNB at $285 will be placed. A stop-limit order provides greater control to investors by determining the maximum or minimum prices for each order. When the price of the stock achieves the set stop price, a limit order is triggered, instructing the market maker to buy or sell the stock at the limit price. It helps limit losses by determining the point at which the investor is unwilling to sustain losses.

  • Now, if the price declines to $10, your broker will sell as many of the 100 shares as possible, down to a price of $9.80.
  • With the limit order, the broker will sell or purchase the stock at the stated price or at a better one.
  • When an instrument hits the stop price, a limit order is activated instead of a market order.

And you may be able to lock in profits if the price starts to decline. Now we’ve studied stop-limit orders, what’s the best way to use them? Here are some basic trading strategies to increase the effectiveness of your stop-limit orders and avoid some of their disadvantages.

The underlying assumption behind this strategy is that, if the price falls this far, it may continue to fall much further. A sell-stop order is a type of stop-loss order that protects long positions by triggering a market sell order if the price falls below a certain level. The investor specifies the limit price, thus ensuring that the stop-limit order will only be filled at the limit price or better. However, as with any limit order, the risk here is that the order may not get filled at all, leaving the investor stuck with a money-losing position. Suppose you buy Dell at $50 per share and set up a stop-loss order at $38.

  • Most online brokers offer stop-limit orders with a day-only or GTC expiry.
  • Sell Simulated Stop-Limit Orders become limit orders when the last traded price is less than or equal to the stop price.
  • Imagine that same situation, only this time you use a stop-limit order.
  • I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours.

As soon as BNB reaches $310, a limit order to buy BNB at $315 is placed. Note that $315 is your limit price, so if the market goes up too quickly above it, your order might not be filled completely. Let’s assume an investor is long 100 shares of XYZ, and that shares are currently trading for $75. The investor decides they’d like to exit their position if shares of XYZ drop 20% from that level.

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