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For example, assume that ABC Inc. is trading at $40 and an investor wants to buy the stock once it begins to show some serious upward momentum. The investor has put in a stop-limit order to buy with the stop price at $45 and the limit price at $46. If the price of ABC Inc. moves above $45 stop price, the order is activated and turns into a limit order. As long as the order can be filled under $46, which is the limit price, the trade will be filled. If the stock gaps above $46, the order will not be filled.
If instead a limit buy at $46 were entered while the stock was at $40, then the stock would likely be bought for $40, since the limit order means "buy at any price less than $46". If just a stop order were placed, then the stock could be bought for more than $46, since the stop means "buy at any price as soon as the stock goes higher then $46".
Selling is the same, but the directions are opposite. Suppose the stock in the example above has a current price of $46 and you put in a stop-limit sell with a stop price of $41 and a limit of $40. When the stock drops below $41, a limit sell is placed that will sell your stock for at least $40 if possible. If the stock drops below $40 before your limit order can be filled (e.g. because there are many other sellers front-running you), then your limit order is not filled until the price comes back to $40.
If instead you had just a limit sell, since the price is already above $40 you'd likely get it filled immediately somewhere near $46. A "normal" limit sell is placed above the current price, since a limit sell is "sell the stock at any price above X". With a stop-limit sell, both prices are generally below current market ("sell if the stock drops below X, but don't sell for less than Y")
If instead a limit buy at $46 were entered while the stock was at $40, then the stock would likely be bought for $40, since the limit order means "buy at any price less than $46". If just a stop order were placed, then the stock could be bought for more than $46, since the stop means "buy at any price as soon as the stock goes higher then $46".
Selling is the same, but the directions are opposite. Suppose the stock in the example above has a current price of $46 and you put in a stop-limit sell with a stop price of $41 and a limit of $40. When the stock drops below $41, a limit sell is placed that will sell your stock for at least $40 if possible. If the stock drops below $40 before your limit order can be filled (e.g. because there are many other sellers front-running you), then your limit order is not filled until the price comes back to $40.
If instead you had just a limit sell, since the price is already above $40 you'd likely get it filled immediately somewhere near $46. A "normal" limit sell is placed above the current price, since a limit sell is "sell the stock at any price above X". With a stop-limit sell, both prices are generally below current market ("sell if the stock drops below X, but don't sell for less than Y")
See https://money.stackexchange.com/questions/88719/why-use-a-stop-limit-order-instead-of-a-limit-order
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