Stop-Limit
A stop-limit order combines a stop-loss order and a limit order. Stop-limit orders allow you to set the minimum profit you’re happy to take or the maximum you’re willing to spend or lose on a trade. Once you set a stop-limit order and the trigger price is reached, a limit order will be placed automatically, even if you are logged out or offline. You can strategically place stop-limit orders by considering resistance, support levels, and coin volatility.
In a stop-limit order, the stop price is the trigger price for the exchange to place a limit order. The limit price is the price at which your order will be placed. You can customize the limit price, which is usually set higher than the stop price for a buy order and lower for a sell order. This difference accommodates market price changes between when the stop price triggers and the limit order is placed.
This is what the stop-limit order tab looks like in the Spot Trading interface.
Stop: Enter the price you want your order to trigger.
Price: Enter the price you want to sell once the ‘stop’ price is reached. When selling, the value should be lower than your ‘stop’ price, and when buying, it should be higher.
Amount: Enter the amount you want to sell or buy at the specified ‘stop’ limit.
Here is an example of a filled ‘SELL’ order. In this case, the stop-limit order is triggered when the coin reaches the value of 16800 (the stop price). Then the coin is sold for a value of 16770 (limit price). In this example, we are selling 0.009 BTC.
You can also select a percentage under ‘Amount’ to buy or sell at the specified ‘stop’ limit. Those percentages refer to the funds of a coin held by you.
Once you have made a stop-limit order, it will appear on the ‘order book’ and under ‘open orders,’ where you can track or cancel its progress.
Some more information
Note that the stop-limit order will only be placed if and when the stop price is reached. The limit order will only be executed if the market price reaches your limit price. If your limit order is triggered (by the stop price), but the market price doesn’t reach the price you set, the limit order will remain open.
Sometimes you might be in a situation where the price drops too fast, and your stop-limit order is passed over without being executed. In this case, you may need to appeal to market orders to get out of the trade quickly.
Advantages of using a stop-limit order
A stop-limit order lets you customize and plan out your trades. We can’t always be checking prices, especially in the 24/7 crypto market. Another advantage is that a stop-limit order lets you set a suitable amount of profit to take.
Disadvantages of using a stop-limit order
Stop-limit orders share the same disadvantages as limit orders, mainly because there’s no guarantee they will be executed. A limit order will only execute once it reaches the specified price or higher. However, that price may never be reached. Even though you can create a gap between your limit and stop prices, more is needed sometimes. Highly volatile assets can overshoot the spread you place in your order.
A stop-limit order is a powerful tool providing more trading capability than simple market orders. There is also the added benefit of not needing to be actively trading for the order to complete. Combining multiple stop-limit orders makes it easy to manage your holdings, whether the price falls or rises.