Stop-limit order
A stop-limit order combines a trigger price with a limit price, becoming a rather than a once the trades at or through the stop level. Until the trigger is reached the order sits inactive, exactly like a plain , but once it activates it enters the market as a at the specified limit price rather than executing immediately at whatever price is available.
This addresses the main weakness of a plain , which turns into a on trigger and can fill at an unpredictable, sometimes far worse, price during a fast or gapping move. A stop-limit order guarantees the investor will never get a worse price than the limit specified, once triggered it behaves with the same price discipline as any other .
The tradeoff is that a stop-limit order can fail to execute at all if the price moves through both the stop level and the limit level too quickly, leaving no opportunity to fill within the acceptable range. In a sharp decline, for example, a stop-limit order meant to sell and limit losses could trigger and then simply sit unfilled as the price keeps falling past the limit price, leaving the investor holding a losing position they intended to exit. Because of this risk, a stop-limit order suits investors who value price certainty over guaranteed execution, while a plain suits those who prioritize getting out of the position no matter the price.