Tutorial: What is a stop-limit order & How to use it

What is a stop-limit order?

A stop-limit order is a limit order that has a limit price and a stop price. When the stop price is reached, the limit order will be placed on the order book. Once the limit price is reached, the limit order will be executed. Stop-limit orders allow traders to set the minimum amount of profit they’re happy to take or the maximum they’re willing to spend or lose on a trade. Once you set a stop-limit order and the trigger price is reached, a limit order will be placed automatically, even if you are logged out or offline.

Stop price: When the asset’s price reaches the stop price, the stop-limit order is executed to buy or sell the asset at the limit price or better.

Limit price: The selected (or potentially better) price at which the stop-limit order is executed.

How does a stop-limit order work?

The stop price acts as a trigger to place a limit order. When the market reaches the stop price, it automatically creates a limit order with a custom price (limit price).

Although the stop and limit prices can be the same, this isn’t a requirement. In fact, it would be safer for you to set the stop price (trigger price) a bit higher than the limit price for sell orders. For buy orders, you can set the stop price a bit lower than the limit price. This increases the chances of your limit order filling after it triggers.

Example 1 - BUY stop-limit Order

BTC is currently at $20,000, and you'd like to buy when it starts to enter a bullish trend. However, you don't want to pay too much for the BTC if it quickly begins to rise, so you need to limit the price.

Suppose that you set your stop price at $21,000 and your limit price at $21,500. As soon as BTC reaches $21,000, a limit order to buy BTC at $21,500 is placed. Your order might be filled with a price of $21,500 or lower. Note that $21,500  is your limit price, so if the market goes up too quickly above it, your order might not be filled completely.

Example 2 - SELL stop-limit Order

You bought BTC at $18,000 and it’s now at $22,000. To prevent losses, you decide to use a stop-limit order to sell BTC if the price drops back to your entry. You set up a sell stop-limit order with a stop price of $18,500  and a limit price of $18,000 (the price you purchased BTC at). If the price reaches $18,500, a limit order to sell BTC at $18,000 will be placed. Your order might be filled with a price of $18,000 or higher.

• A limit order is invalid before the stop price is triggered, including when the limit price is reached ahead of the stop price.
• If you set the stop-loss limit too high or the take-profit limit too low, your order may never be filled because the market price cannot reach the limit price you set.

How to Buy/Sell stop-limit on Kikitrade?

1. Go to [Market], select the pair you want to trade in, then click [Buy] or [Sell]
2. Tap [Stop-limit]
3. Enter the stop price, limit price and the amount of crypto you wish to trade.