A stop-limit order is a type of order used primarily in stock trading, cryptocurrencies, or other financial assets. It combines two elements: a trigger price (stop) and a limit price (limit). It is useful for better controlling the price at which a trade is executed.
How does it work?⚙️
1. Stop price: It is the price that, when reached, activates the limit order.
2. Limit price: It is the minimum or maximum price at which you are willing to buy or sell a stock or asset after the order is triggered.
Example📝:
Suppose you have a stock that is currently worth $50, and you want to sell it if the price drops to $45, but you do not want to sell it for less than $44.
Stop price: $45 → When the stock price reaches $45, the stop-limit order is activated.
Limit price: $44 → The stock will be sold if the price remains between $45 and $44. If the price falls below $44, the order will not be executed.
✅Advantages: It gives you more control over the price at which the trade is executed. It protects your investments against drops or market fluctuations.
❎Disadvantages: If the market is very volatile or the price drops quickly below the limit, the order may not be executed.
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