A Stop Limit order is a conditional order that is designed to help you buy breakouts, cut your losses, or take profits.
It works using and specifying two prices:
- Stop price: the price level that activates your order once the stock reaches it
- Limit price: the highest price you are willing to pay (if you're buying) or the lowest price you are willing to sell (if you're selling).
Important reminder: When buying, your limit price must be equal or greater than your stop price. When selling, your limit price must be equal or less than your stop price.
When the stock hits your stop price, your order does not immediately execute at any available price. Instead, it becomes a limit order, meaning it will only transact at your defined price or better.
How to use a Buy Stop Limit order
A buy stop limit order is used when you want to enter a stock only after it confirms upward momentum, while controlling the maximum price you are willing to pay. Instead of buying immediately, you instruct the platform to purchase shares only if the stock reaches a predefined level, signaling potential strength or a breakout.
Example 1: Stop limit order to buy a breakout
Imagine a stock is trading below resistance and you believe that a break of ₱236.20 signals a breakout. You can set your stop price at the breakout level of ₱236.20 and set your limit price to ₱237.00. You will only be filled at ₱237.00 or lower.
Important reminder: A buy stop limit offers price control but not guaranteed execution. If the stock gaps sharply above your limit price, your order may not fill, and the move could continue without you. This is the cost of refusing to overpay.
How to use a Sell Stop Limit order
A sell stop limit order is used when you want to exit a position to take profit or after the stock shows signs of weakening, while still controlling the lowest price you are willing to accept. Instead of selling immediately, you instruct the platform to sell your shares only if the stock falls to a predefined level, signaling potential downside risk or a breakdown.
Example: Stop limit order to cut your losses
You purchased a stock at ₱237.00 and want to protect your position if it begins to weaken below ₱224.00, a level you identify as key support. To manage this risk, you set a stop price at ₱224.00 and a limit price at ₱223.00. If the stock trades down to ₱224.00, your sell order is automatically triggered. However, the order will only execute at ₱223.00 or higher, helping you avoid selling at significantly lower prices.
Important reminder: A sell stop limit provides price protection, but not execution certainty. If the stock gaps below your limit price, the order may remain unfilled.
Example 2: Stop limit to take profits
You entered the stock earlier in the uptrend and watched it climb steadily as it respected a rising trendline. You identify ₱251.00 as the level where a break below the trendline would signal weakening momentum. To prepare for this scenario, you place a stop price at ₱251.00 and a limit price at ₱250.00. If the stock falls to ₱251.00, your sell stop limit order is triggered. The system will then attempt to execute the trade at ₱250.00 or higher, helping you lock in gains while avoiding a deeper reversal.