There are basically three types of order that can be placed in an exchange such as stock exchange, commodity exchange, cryptocurrency exchange etc., In order to know what is stop limit order, you need to understand about the other 2 types (market order& limit order). In this blog post let me explain you on all 3 types of orders.
A market order is an order that is executed at the available market price, to do a market order you can specify it as a market order if available or buy or sell entering the prize as zero.
In Limit order, you buy or sell quoting a specific value. In case of a buy order the limit value should be less than market price, in case of a sell value, the limit price should be greater than the market price. Here you typically bargain for a better price than market value.
Stop limit order
Stop limit orders are orders where the order gets executed once the trigger price is reached. Once triggered the stop limit order will be like a limit order. Stop limit orders are opposite of limit orders, the reason why say this is with stop limit order you will buy above the market price once the price is reached and sell below the market price when the specific price is reached.
Example, while buying, let us assume ether is at 37k and you think Ether will move up fast if it crosses 40k so you place an order at a trigger price of 40k and limit price of 40.1k. When market price reaches 40k your order would get executed and ether will be bought till 40.1k based on availability in the market within the price range.
Similarly while selling, Let us assume Ether is at 35.9k currently and after looking at the chart you think if Ether comes below 34k it will fall till 28k, so you decide to sell ether only if it comes below 34k. so with stop limit order you can set the trigger price as 35k and limit price as 34.9k. now what would happen is when the markets fall and reach 35k this order would get executed and be sold till 34.9K as much as the available volume on the buying side.
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