A Stop-Limit Order is a type of order that combines the features of a stop order and a limit order. It is used by investors to manage the risk of their investments.A stop order is an order to buy or sell a stock when it reaches a certain price, known as the stop price. Once the stock's price reaches the stop price, the stop order becomes a market order and the stock is bought or sold at the best available price.A limit order, on the other hand, is an order to buy or sell a stock at a specific price or better. The order will only be executed at the specified price or a better price.A stop-limit order combines these two types of orders. It is an order to buy or sell a stock once the stock's price reaches a certain stop price, but it also has a limit price. The limit price is the maximum or minimum price at which the order can be executed.For example, an investor might use a stop-limit order to buy a stock that they believe is undervalued. They might place a stop-limit order to buy the stock at a stop price of $50, with a limit price of $55. If the stock's price drops to $50, the stop order is activated and becomes a limit order to buy the stock at $55 or better.Investors use stop-limit orders to manage risk by setting a limit price to protect against large losses. It also allows for more precise control over the price at which a stock is bought or sold. However, it's important to note that stop-limit orders don't guarantee an execution, the order will only execute if the stock's price reaches the stop price and there are willing buyers or sellers at the limit price.
