A stop-limit order is an order placed with a broker that combines the features of a stop order with those of a limit order. A stop-limit order will be executed at a specified price, or better, after a given stop price has been reached.

Once the stop price is reached, the stop-limit order becomes a limit order to buy or sell at the limit price or better. A timeframe must also be set, during which the stop-limit order is considered executable. The primary benefit of a stop-limit order is that the trader has precise control over when the order should be filled. A stop order is an order that becomes executable once a set price has been reached and is then filled at the current market price.

A traditional stop order will be filled in its entirety, regardless of any changes in the current market price as the trades are completed. A limit order is one that is set at a certain price. It is only executable at times the trade can be performed at the limit price or at a price that is considered more favorable than the limit price. If trading activity causes the price to become unfavorable in regards to the limit price, the activity related to the order will be ceased.

What's the difference between a stop and a limit order?

By combining the two orders, the investor has much greater precision in executing the trade. A stop order is filled at the market price after the stop price has been hit, regardless if the price changes to an unfavorable position. This can lead to trades being completed at less than desirable prices should the market adjust quickly.

BBY Stock Price - Best Buy Co. Inc. Stock Quote (U.S.: NYSE) - MarketWatch

For example, assume that ABC Inc. If the price of ABC Inc.

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