Stop limit order

A trigger order that places a limit order once the price reaches a level you set. You keep control over the fill price, at the cost of the order possibly not executing at all.

Definition

A stop limit order combines two price levels. The trigger price decides when the order becomes active, the limit price decides the worst fill you will accept once it is. Until the trigger is hit, nothing sits on the book.

The gap between the two prices

Setting the limit equal to the trigger looks tidy and is usually the wrong choice. By the time a stop fires the price is already moving through that level, so an order priced exactly there often finds nothing to trade against.

Widen the gap and the order fills more reliably but at a worse price. Narrow it and you protect the price at the risk of no fill. There is no setting that removes the trade-off, only settings that choose a side of it.

The risk that matters

A stop limit that does not fill leaves the position open. In a sharp move against you that is the worst of both worlds: you believed you had an exit, and the market went straight past your limit price without touching it.

This is why a stop market is often the safer instrument for a protective stop, and a stop limit the better one for a planned entry where missing the trade is acceptable.

Where you will run into it

Order-book perpetual DEXs list stop limit next to stop market in the trigger order menu, both usable for take-profit and stop-loss. Which price the trigger watches, mark price or last traded price, is set per exchange and worth checking before you place one.