Stop-Limit Order
Order TypesA two-part order that combines a stop trigger with a limit price. Once the stop price is hit, a limit order is placed instead of a market order.
What Is a Stop-Limit Order?
A stop-limit order combines a Stop Order trigger with a Limit Order execution. It has two prices: the stop price (trigger) and the limit price (maximum fill price). When the market reaches the stop price, a limit order is placed at the limit price instead of a market order. This gives you control over the worst price you will accept.
Stop-Limit Example
You want to buy EUR/USD on a breakout above 1.0880 but do not want to pay more than 1.0885. You set a stop-limit with a stop price of 1.0880 and a limit price of 1.0885. When the price hits 1.0880, a buy limit order is placed at 1.0885. You will be filled at 1.0885 or better, but if the price jumps straight to 1.0890 (past your limit), the order will not fill.
When to Use Stop-Limit Orders
Stop-limit orders are useful during volatile conditions where you want to enter on a breakout but are concerned about Slippage. The trade-off is that your order may not fill at all if the market moves too quickly past your limit price. This is more common during news releases or gap openings. Not all forex brokers support stop-limit orders on all platforms.
Related Terms
Stop Order
An order to buy above or sell below the current market price. Stop orders become market orders once the trigger price is reached.
Limit Order
An order to buy below or sell above the current market price. Limit orders guarantee price but not execution.
Stop-Loss
An order that automatically closes a position at a predetermined price to limit losses. The most important risk management tool in forex trading.
Slippage
The difference between the expected fill price and the actual fill price of an order. Slippage occurs when market conditions change during order execution.