What is a Stop Limit Order? Example What is a Stop Limit Order?
The stop limit order is a common order type that is widely employed by investors to help preserve profits and limit losses on stock and option positions. This order type is entered with a fixed stop price and fixed limit price. Once the stop price is triggered, a limit order is sent to the marketplace. What is the Difference between a Stop and a Stop Limit Order? The difference between Stop and Stop Limit orders is that Stop orders guarantee the execution if the stop price is triggered, but not the price of the execution; and Stop Limit orders guarantee you a specific price, but not execution. Stop Limit orders don’t guarantee me an execution once the stop price is triggered? Correct, if you want a guaranteed execution once the Stop price is triggered, enter a Stop order.
Example
Why Use a Stop Limit Order? XYZ is trading at $250.00. You are long 100 shares of the underlying and would like to be protected in case XYZ trades lower and you would like to receive a fixed price or better in the case your stop is triggered. 1) What to do? You set a fixed lower sell stop price at $245, stop simit of 244.85. If XYZ trades at $245 or lower, the stop is triggered and a sell limit order with a limit $244.85 is sent to the marketplace. Enter the Order: Enter a sell stop order, stop price of $245, limit price of $244.85. 2) What happens next? XYZ rises to $262. The sell stop order is still $245. 3) When is the Stop Limit Price Sent to the Marketplace? XYZ does not go any higher and drops back down to $245. Your sell stop order is then elected (triggered) and a limit order to sell 100 shares at $244.85 is sent to the marketplace.

Notes: Question: What are the trigger methods for stop limit orders? Equity Orders: The trigger methods for stop limit orders are: 1) Buy stop limit orders- The trigger method for a buy stop limit order is the last trade. 2) Sell stop limit orders- The trigger method for a sell stop limit order is the last trade.