What is a Stop-Limit Order on US Stocks?

This order allows you to execute an order using a limit order once the market price reaches a certain price point, known as the stop price. To create a stop limit order, you must set a stop price and a limit price to determine the maximum price you are willing to pay to buy the stock. If the market price reaches the stop price, your order will be activated. Only when the last available execution price in the market is at the limit price you specified will your order be executed. However, similar to a limit order, this order type only guarantees the execution price while the execution of the order is not guaranteed.

Limit price is the highest price in making a purchase or the lowest price in making a sale that you can tolerate so that the purchase price you get later will not be higher than the limit price you set. Likewise, the selling price you get will not be lower than the limit price that has been previously determined.

Example:

You want to buy a stock if the price starts to rise, but you want to limit the maximum purchase price. So you set the Stop Price at $100.00 and the Limit Price at $105.00.

When the market price hits $100.00, your order is active as a Limit Order at $105.00. This means that the order will only be executed between $100.00 and $105.00. If the price immediately goes above $105.00, the order will not be executed because it exceeds the limit you set.