A Stop Limit Order is an order type that focuses on controlling the buy or sell price. Once the market price reaches the specified Stop Price, the system will automatically place a Limit Order into the Order Book.
A Stop Limit Order consists of two price conditions:
- Stop Price refers to the price level that triggers the order to become active.
- Limit Price refers to the price that the user is willing to accept for buying or selling.
When the market price reaches the specified Stop Price, the system will place a Limit Order into the Order Book using the Limit Price set by the user.
Using Stop Limit BUY
Breakout Trading Scenario
Scenario: The user wishes to buy when the price breaks above the resistance level at THB 105. The user sets the order as follows:
- Stop Price = THB 105
This means that when the market price rises to THB 105, the system will activate the order. - Limit Price = THB 104
This means that the system will place a Limit Buy Order at THB 104.
Result: When the market price rises to THB 105 or higher, the system will automatically place a Limit Buy Order at THB 104 into the Order Book.
However, since the Limit Price of THB 104 is lower than the market price that triggered the order at THB 105, the order may not be matched immediately. The order will only be matched if there is a seller willing to sell at THB 104, or if the market price moves back down to that price level.
Using Stop Limit SELL
Stop Loss Scenario
Scenario: The current market price is THB 100.
The user wishes to set a stop-loss point if the price falls to THB 95, but does not want to sell below THB 96. The user sets the order as follows:
- Stop Price = THB 95
This means that when the market price falls to THB 95, the system will activate the order. - Limit Price = THB 96
This means that the system will place a Limit Sell Order at THB 96.
Result: When the market price falls to THB 95 or lower, the system will automatically place a Limit Sell Order at THB 96 into the Order Book.
However, since the Limit Price of THB 96 is higher than the market price that triggered the order at THB 95, the order may not be matched immediately. The order will only be matched if there is a buyer willing to buy at THB 96, or if the market price rebounds to that price level.
Suitable Use Cases
- Breakout Trading: Used when the user wants to buy after the price breaks above an important level, such as a resistance level, while still setting the maximum acceptable purchase price to avoid buying at a price higher than planned.
- Stop Loss: Used when the user wants to place a sell order in advance if the price falls to a specified level, in order to help manage risk and limit potential losses.
- Relatively Stable or Sufficiently Liquid Markets: Stop Limit Orders are suitable for markets where prices are not excessively volatile or where there is sufficient liquidity. If the price moves too quickly, the Limit Order may not be matched immediately.