<p>A stop‑<a href="/NewSite/encyclopedia/limit-order/" class="ency-link">limit order</a> is a hybrid order type that combines the features of a <a href="/NewSite/encyclopedia/stop-order/" class="ency-link">stop order</a> and a limit order. When the market price reaches a specified stop price, the order is activated and becomes a limit order that will only execute at the limit price or better. This structure gives traders control over both the trigger point and the execution price.</p>

<h2>How It Works</h2>
<p>To place a stop‑limit order, the trader sets two price levels:</p>
<ul>
<li><strong>Stop price</strong> – the price that triggers the order.</li>
<li><strong>Limit price</strong> – the worst price at which the trader is willing to buy or sell after activation.</li>
</ul>
<p>For a buy stop‑limit, the stop price is set above the current market price; once the ask price hits or exceeds the stop, a buy limit order is submitted at the limit price. For a sell stop‑limit, the stop price is set below the current market price; when the bid price falls to or below the stop, a sell limit order is sent at the limit price. The order will only fill if the market can meet the limit price; otherwise it remains pending or may expire if the price moves away.</p>

<h2>Why It Matters</h2>
<p>Stop‑limit orders help traders manage risk while avoiding unwanted slippage. They are useful when a trader wants to enter or exit a position only after a certain price level is confirmed, but refuses to accept a worse price than a predetermined limit. For example, an investor holding a stock at $50 fears a drop but does not want to sell below $48. By placing a sell stop‑limit with a stop at $49 and a limit at $48, the stock will be sold only if it falls to $49 or lower and can be executed at $48 or higher. If the price gaps down to $47, the order will not fill, protecting the investor from an undesired low‑price sale. This balance of trigger precision and price control makes stop‑limit orders a valuable tool for intermediate‑level traders seeking disciplined execution in volatile markets.</p>