A stop limit order is an order that does not enter the order book until the market price reaches a certain stop price condition. This order can be used to mitigate risks of open position as a stop loss, and as a tool to postpone your purchase if the price movement breaks the key price level.
How it works?
The best way to understand a stop limit order is to start with an explanation of terms. The stop price is basically the price that triggers the placement of a limit order. The limit price is the specified price of the limit order the system must place to the order book. Once the stop price condition is reached, the system will send a request to place a limit order for a specified limit price.
- Stop price - conditional price trigger
- Limit price - actual price
Note: You can set the same stop and limit price, but it will significantly reduce your chances of your limit order getting filled after the stop price is triggered.
How to place Stop Limit order?
To place Stop Limit order, please go to the Trading page and proceed to the orders window which is placed on the bottom left corner of your screen. Select Stop Limit from the Order's tab and submit your order. There are many situations when you want to utilise Stop Limit orders. As mentioned before it can be a great risk management tool for an open position on the sell side. Alternatively, you can set a stop limit buy order which will be executed after a certain resistance level is breached, so you can join the start of an uptrend.
Important: The Stop Limit order is not visible on your exchange account and we will place a limit order only after the price condition is triggered. This order will appear as a standard Limit order on your exchange account. Please, make sure that you will have enough balance available at the time when the trigger price is reached.
Buy Stop Limit order
The buy stop limit order is a perfect tool to join the uptrend movement when a certain resistance level is breached. Let's imagine you believe that the price of Bitcoin is likely to go up but you are still uncertain about buying it at the current price. We can set a postponed buy order which will be triggered after the resistance is passed.
To do so, we will enter a stop trigger price as 5650.00 USDT, and the actual purchase price 5655.00 USDT. In this scenario, I would like to guarantee that my order will be filled and this is why I put my Limit price above Stop price. Now I should wait until the best ask price for Bitcoin become 5650.00 USDT, and when that happens the Bitsgap system will execute a limit order to buy 0.1 BTC for 5655.00 USDT.
Sell Stop Limit order
The sell stop limit order is another great tool to mitigate risks of open positions in case of the price going down breaking the key support level. Assuming we already have Bitcoin and we believe that it is overbought and the price is likely will go down but you are again uncertain about selling it at the current price. We can set a stop loss order which will be triggered after the support level is breached.
To protect your crypto investment from a rapid drop, let's set up a stop loss order. We did our research and identified the key support level. With that knowledge, we want to place our stop loss below it. We will enter a stop trigger price as 5320.00 USDT and limit order price as 5310.00 USDT. This time, our limit order is below the stop price because again, we would like to guarantee that the order will be filled. When the best bid price for Bitcoin become 5320.00 USDT a limit order to sell 0.1 Bitcoin at the price of 5310.00 USDT will be placed.
Move Stop Limit order
You can move your active Stop Limit orders at any time as the market expectation changes. Traditionally you would cancel and set and new stop limit order but on Bitsgap you can do it more easily.
Drag and drop your active stop limit order on the graph on to a new price level, like shown below.
You will receive a confirmation window where you can check and adjust the new price condition and limit price for your stop limit order. Please, keep in mind that you are moving the trigger price and not the actual price for your limit order, so you need to manually enter a new limit price in this window. When you are ready, click the "OK" button to confirm new changes. Your active stop limit order will be moved to a new price level in a few seconds.
Cancel Stop Limit order
There are two ways to cancel your active stop limit order. You can cancel your active stop limit order directly on the chart (1) or from the "Open orders" menu (2). Simply click the cross and system will cancel selected stop limit order.
Want to place stop limit orders on all your favourite crypto exchanges? Create a free Bitsgap account now!