Crypto glossary

Stop-Limit Order

A stop-limit order is an order with two prices: a stop price that activates it and a limit price that sets the worst price you will accept. Once the stop price is reached, it becomes a normal limit order.

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The two prices explained

The stop price is the trigger. Until the market trades at that level, the order sits dormant and is not visible in the order book. The limit price is the boundary: once triggered, the order will only fill at the limit price or better.

For a sell stop-limit, the limit is usually set a little below the stop price, to give the order room to fill. For a buy stop-limit, the limit is usually set a little above the stop.

An example

Say you hold 1 BTC bought at 60,000 dollars. You place a sell stop-limit with a stop at 55,000 and a limit at 54,500. If the price drops to 55,000, a limit order to sell at 54,500 or higher goes live. In an orderly decline it fills somewhere between 55,000 and 54,500.

Now imagine the price falls from 55,100 to 53,000 within seconds. Your order triggers, but there are no buyers at 54,500 or above. It stays unfilled, and you still hold the BTC at 53,000 and possibly lower.

Why traders use stop-limit orders

The point is price control. A plain stop loss usually becomes a market order and accepts whatever price is available, which can be very poor in a thin or crashing market. A stop-limit refuses to sell below your limit.

Buy stop-limits are also used to enter breakouts: you only want to buy if the price rises past a level, but you do not want to chase it beyond a certain point.

Risks and common mistakes

The main risk is the one in the example: no fill. A stop-limit that is meant to protect you can fail exactly when protection matters most, during a gap or a sharp drop. Setting the limit very close to the stop makes this more likely.

Other mistakes include mixing up which price is which, and forgetting that a triggered but unfilled order may later fill if the price returns, possibly when you no longer want it to.

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Frequently asked questions

What happens if a stop-limit order is triggered but not filled?

It stays in the order book as a limit order until the price comes back to your limit, you cancel it, or it expires. Meanwhile your position stays open.

Is a stop-limit better than a stop loss?

Neither is better in general. A stop loss prioritises getting out; a stop-limit prioritises the price. The choice depends on which risk you would rather accept.

How far apart should the stop and limit price be?

There is no fixed rule. A wider gap makes a fill more likely but allows a worse price; a narrower gap protects the price but raises the chance of no fill, especially in volatile markets.

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