Stop Limit Order
a.k.a. Stop-limit
An order that becomes a limit order once a trigger price is hit, so it won't fill beyond the limit you set.
A stop limit order has two prices. The stop price is the trigger; once it is touched, the order wakes up. The limit price is your line in the sand; the order will only fill at that price or better.
It protects you from terrible fills in fast markets, which a plain stop order cannot. The catch: if price gaps straight past your limit, the order may not fill at all, leaving you in a losing trade you wanted out of.
Stop limit in a fast market
- You are long EUR/USD from 1.0900.
- You set a sell stop limit: stop 1.0850, limit 1.0840.
- Bad news hits and price drops from 1.0855 straight to 1.0830.
Bottom line: The stop triggered at 1.0850, but price never traded between 1.0850 and 1.0840, so nothing filled. You are still long, now 70 pips down.
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