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Stop Limit Orders

A Stop-Limit Order combines the features of a Stop and a Limit Order. 

In opposition to a conventional Stop Order which is converted into a Market Order once its Stop target price has been reached, the Stop-Limit order is converted into a Limit order once its Stop price has been met. Then, the newly active Limit order will be executed at its target Limit price or a better one.

Stop-Limit Orders are primarily intended to serve as a protection against market gaps. The Stop and the Limit target prices of the order set a price range of execution and if the price of the security surpasses that range, the Stop-Limit order will remain pending until the price goes back within the set price range.

Therefore, the Stop-Limit orders would be correctly set in the following way:

  • Stop-Limit Buy Orders should have the Stop price above the current price of the security and below the Limit price;
  • Stop-Limit Sell Orders should have the Stop price below the current price of the security and above the Limit price;

Investors often use Stop-Limit Orders in an attempt to limit a loss or protect a profit, in case the stock moves in the wrong direction, while at the same time protecting themselves from undesired rapid price movements. Once activated, Limit Orders will only execute if a specified price can be met for trade-in full, ceasing once the price turns unfavourable.

Stop Limit 'Buy' Orders

Here's how to set one:

  1. Tap to 'Buy' a share;
  2. Select the 'Stop Limit' Order type;
  3. Select the Number of Shares;
  4. Set the Stop Price. The price should be above the current price to convert the order into a Limit order;
  5. Set the maximum Limit price you are willing to pay for your share.

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The execution of the order will depend first on the 'Stop Price, and thereafter on the 'Limit'. 

 

Stop Limit 'Sell' Orders

Here's how to set one:

  1. Tap on 'Sell';
  2. Select the 'Stop Limit' Order type;
  3. Select Number of Shares;
  4. Set the Stop Price. The price should be below the current price to convert the order into a Limit order;
  5. Set the minimum Limit Price for which you are willing to sell a share. 

The execution of the order will depend first on the 'Stop Price', and therefore on the 'Limit'. 

*The order will remain pending and the funds needed for its execution - blocked, until the price is reached. It cannot be modified unless cancelled and replaced by a new order of the same or a different type. 

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