Business, Legal & Accounting Glossary
A stop-limit order automatically liquidates a stock at a specific price. A stop-limit order is designed to either protect a profit or to minimize a loss. Unlike a simple stop order, which liquidates a position at the best price possible, a stop-limit order liquidates a position at a specific price (or better). This can pose a risk to the investor in a fast-moving market, where it is possible for a stop-limit order to be passed over with no one willing to sell at the specified price. A trailing stop-limit order can be an excellent risk management tool. A trailing stop-limit order placed, say, 50 cents below a stock’s highest trade limits an investor’s loss to 50 cents per share, but if a stock’s price rises, the trailing stop-limit order rises along with the stock, locking in a profit.
An order to buy or sell a certain quantity of a certain security at a specified price or better, but only after a specified price has been reached. A stop-limit order is essentially a combination of a stop order and a limit order.
A specialty brokerage order that becomes active (the stop order part) when a stock hits a certain price and subsequently triggers a limit order.
For example, if you bought a stock at $10 that’s now trading at $20 and you want to sell if the stock hits $18.25, but you don’t want to accept anything less than $18, you can place a stop limit order with, for example, a stop at $18.25 (triggers the order) and a limit at $18 (puts a floor on the acceptable price). It should be noted that the stop limit will get you the price you seek (if it’s available), but it doesn’t guarantee execution.
Trailing stop
Stop order
To help you cite our definitions in your bibliography, here is the proper citation layout for the three major formatting styles, with all of the relevant information filled in.
Definitions for Stop-Limit Order are sourced/syndicated and enhanced from:
This glossary post was last updated: 28th November, 2021 | 0 Views.