Stop-limit order
Also known as: stop limit
A stop-limit order is a customer order that activates when the market hits a stop price, then executes only at the limit price or better. It combines a stop order's trigger with a limit order's price protection.
A stop-limit order combines two order types in sequence. Nothing happens until the security trades at or through the stop price — that trade triggers (or "elects") the order. Once triggered, the order becomes a limit order that can only execute at the limit price or better, rather than a market order that fills at whatever price is available.
For example, an investor owning stock at $50 might enter a "sell 100 shares at 45 stop, 44 limit" order. If the stock falls and trades at $45 or below, the order is triggered. From that point, the shares will only sell at $44 or higher. If the stock gaps down to $42 before the order can fill, the sell order sits unexecuted until the price recovers to $44 — if it ever does.
That trade-off is the heart of the concept. A plain stop order guarantees execution after the trigger but not price; a stop-limit order guarantees price but not execution. Investors use stop-limits when avoiding a bad fill matters more than being certain of getting out of the position.
Order types are core testable material on the SIE, Series 65, and Series 66 exams. Be ready to identify the trigger and execution conditions of a stop-limit order, place stop and limit prices correctly relative to the market, and recognize the risk that a fast-moving market leaves the order unfilled.
Key takeaways
- A stop-limit order is triggered when the security trades at or through the stop price, then becomes a limit order.
- After triggering, it executes only at the limit price or better — never worse.
- Unlike a regular stop order, a stop-limit order may never execute if the market moves through the limit price too quickly.
- Sell stop-limits are placed below the current market; buy stop-limits are placed above it.
- The SIE, Series 65, and Series 66 exams test the mechanics and risks of stop, limit, and stop-limit orders.