What is a stop-limit order?
A STOP-LIMIT feature allows traders to set a buy or sell Limit Order which will be triggered once the Stop Order price has been reached. Stop-limit orders help automate order submissions as traders can set everything in advance and do not have to monitor the market all the time as this type of order allows traders to determine when (at what prices) their orders should be submitted to the market and when they should be filled. Stop-limit orders also allow traders to make more profit in case market prices go up as predicted and prevent loss in case things do not go as planned.
Buy and Sell Stop-Limit Orders
1. Buy Stop-Limit Orders allow an order to be submitted once the Stop-Limit prices meet the specified conditions:
1.1 A Buy Stop Price will serve as a trigger for the Limit Order to proceed.
1.2 A Buy Limit Price is the price that was set by traders to be executed once the Stop Price has been reached.
If the current market price of a coin is 10 THB, traders want to buy the coin at 12 THB but want their order placed when the price goes up to 15 THB first. So they will set the stop price (the placing price) at 15 THB and the limit price (the buying price) at 12 THB.
When the market price moves to 12 THB, their order will not be executed because the market price has not reached the stop price, 15 THB, making their order not yet placed into the order book.
When the market price finally moves to 15 THB (the stop price), this buys stop-limit order will be placed in the market and will be filled when the market price goes down to 12 THB (the limit price).
This kind of buy stop-limit order is usually associated with technical trading in which traders anticipate some sort of price movements in the future. In this case, the traders might anticipate that if the price rises to 15 THB, it will go down to 12 THB later and then jump to a higher price. Therefore, traders want to make sure that the market price movement hits the first condition and follows the anticipated manners before they place the order.
2. Sell Stop-Limit Orders allow an order to be submitted once the Stop-Limit prices meet the specified conditions:
2.1 A Sell Stop Price will serve as a trigger for the Limit Order to proceed.
2.2 A Sell Limit Price is the price that was set by the trader to be executed once the Stop Price has been reached.
The current price of Ethereum (ETH) is 120,000 Baht. You think that the market will be in a downtrend and the price of ETH could fall a lot. Hence, you create a stop-limit sell by setting the stop price at 100,000 Baht and the limit price at 98,000 Baht. When the price drops to 100,000 Baht, the system will immediately create a sell order of ETH at 100,000 - 98,000 Baht.
If the price of ETH continues to fall below 98,000 Baht and your order was not completely matched, your remaining order will continue to match when the market price returns to your stop-limit sell order. As a result, the stop-limit sell function allows you to cut your losses, which is a benefit of this function.
Currently, stop-limit orders are only available for BTC, ETH, USDT, DOGE, ADA, XRP, BNB, IOST, KUB, DOT, NEAR, ALPHA, and CRV on the Bitkub Exchange platform.
You may check out this video by Bitkub Academy to see how it looks when you set a stop-limit order on our application (Thai video).
Additionally, there is a Q&A session live streaming video about stop-limit orders.
You may check out this video by Bitkub Academy to see instructions and tips about a stop-limit order (Thai video).
- The order will be canceled only if you manually do it or the order is successfully matched only. The system will not automatically schedule or cancel the order.
- The example above is just to help you understand better. The company reserves the right to disclaim any responsibility in the event that you follow the example mentioned and experience losses due to the market mechanism.
1. How long does a stop-limit order last?
Answer: After the price hits the stop price, an order will last until the set limit price is reached and completely filled or until the order is canceled by the trader.
2. If the volume in the stop-limit order is partially filled, what will happen?
Answer: An order will stay until all set volume is fully filled at the set limit price or the order is canceled by the trader. However, orders can be partially matched depending on the time when an order is sent to the system (FIFO) and the demand-supply volume at the time.
3. How much different can the stop price and the limit price be?
Answer: The stop and the limit prices exceed the 5% difference, the system will notify the trader about the possibility that the order might be filled partially, or take a long time to be filled. However, traders can set any prices on their own decisions.
You can learn more about order types on Bitkub here.