GLOSSARY // Orders & Execution
Stop-Limit Order
A stop-limit order swaps the market order inside a plain stop for a limit order, capping how bad the exit price can get, at the cost of possibly not exiting at all. It carries two prices: the stop price that triggers it and the limit price that bounds the fill.
The trade-off is exact. A plain stop always gets you out, sometimes at an ugly price; a stop-limit never fills worse than your limit, but if price gaps through both levels the order just rests there while the loss keeps growing. Stop-limits fit fast, liquid tape where a momentary wick would otherwise fill you at the low; they are dangerous as overnight protection.
A trader sets a stop at $21.40 with a limit at $21.25. In an intraday flush to $21.30 the order triggers and fills at $21.32, inside the limit. But if the stock instead gaps from $22.00 to $19.80, the order triggers, the $21.25 limit is unmarketable, and the trader is still long at $19.80.
Related terms
Educational only — not financial advice. Definitions simplified for clarity; markets are messier than definitions.