Say you set a basic stop-loss order to sell 100 XYZ shares if the price declines to $10. Let’s look at an example to better understand stop-limit orders… ![]() So what’s the point of using a stop-limit order? Why not just use a stop-loss order? Why Combine Both a Stop Order and Limit Order? Let’s look more closely at how these orders work, along with when and how to use them. And they can be especially useful for stocks with thin trading volume, such as penny stocks. This type of order can be super helpful for day traders and swing traders who can’t watch the markets all day. Combining the two, we have the stop-limit order. In this example, $9 is the stop level, which triggers a limit order of $9.50. So you might place a stop-limit order to buy 1,000 shares of XYZ, up to $9.50, when the price hits $9. The stop-limit order triggers a limit order when a stock price hits the stop level. Now let’s look at the stop-limit order, which combines the stop and limit orders. Your broker will buy up to 1,000 shares at any price under $8.20. So say XYZ is trading at $8 and you set a limit order to buy 1,000 shares at a limit of $8.20. On the other hand, with a limit order, you tell your broker, “ Buy this stock at any price up to $x.” You can set a stop order … And if the price trades at $10 or higher, your broker will try to buy your shares, no matter the price. With a stop order, you tell your broker, “ when the price hits $x, buy (or sell) the stock.”įor example, you might want to hold XYZ stock if it breaks out above $10. The stop-limit order combines parts of two order types: the stop order and the limit order. 7 Ready to Trade? Come Check Out StocksToTrade.6.3 #3 Stop-Limit Order Strategy: Keep an Eye on Trading Volume.6.2 #2 Stop-Limit Order Strategy: Consider the Stock Volatility When Setting Your Limit.6.1 #1 Stop-Limit Order Strategy: Use Charts to Determine Key Levels.5.3 #3 Stop-Limit Order Risk: You May Pay a Larger Commission.5.2 #2 Stop-Limit Order Risk: You May Only Get a Partial Fill. ![]() 5.1 #1 Stop-Limit Order Risk: You May Not Get Filled.4.1 When You’re Trading Illiquid Stocks.2 Why Do Traders Use Stop-Limit Orders?. ![]()
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