Stop Limit Order
The modified one

A stop-limit order is a type of order used to buy or sell a security when the user-specified stop trigger price is reached or crossed. Learn more about this order type.

Submitting a Stop Limit Order via LYNX

What is a Stop Limit Order?

A stop-limit order is a type of order used to buy or sell a security when the user-specified stop trigger price is reached or crossed. The order has two basic components: the stop price and the limit price. When a trade has occurred at or through the stop price, the order becomes executable and enters the market as a limit order, which is an order to buy or sell at a specified price or better.

This order type combines the features of stop orders and limit orders. It helps investors limit their losses on a position or protect a profit on an existing position while providing control over the execution price.

Key Features

Conditional Execution

A stop-limit order is triggered only when the security’s price reaches the specified stop level and then meets the limit price condition.

It is not executed until both the stop price and limit price conditions are met, differentiating it from a stop order that converts into a market order.

Price Control

When placing a stop-limit order, you set both a stop price and a limit price to control the execution.

The order will only be executed at the limit price or better, providing more price control compared to a stop order.

How does a Stop Limit Order work?

After placing a stop-limit order, it remains inactive until the security’s price reaches the stop level.

Buy Order

If it’s a buy stop-limit order, the order will be activated when the price rises to the stop level, and then it will only be executed if the price is at or below the limit price.

Sell Order

If it’s a sell stop-limit order, the order will be activated when the price falls to the stop level, and then it will only be executed if the price is at or above the limit price.

The order will not be executed if the market price moves past the limit price without filling the order, ensuring more precise control over the trade price. Therefore, you may consider keeping space in terms of price between the stop and the limit.

Example:

You want to sell 300 shares of XYZ to protect your profits. The shares are currently trading at 20 EUR per share.

You place a stop-limit order with a stop price of 18 EUR and a limit price of 17.50 EUR. If the price drops to 18 EUR, your stop-limit order is triggered and will sell the 300 shares only if the price is at or above 17.50 EUR.

If the price falls below 17.50 EUR without the order being filled, it remains unexecuted.

Information

Please note:

By selecting this order type, you prioritize price control over immediate execution. Using a stop-limit order is suitable when you want to limit losses or protect profits with a defined execution price, though it carries the risk of non-execution in rapidly moving markets.

Advantages and disadvantages

Advantages

Disadvantages

Price Control:
With a stop-limit order, you have control over the execution price, ensuring the trade is executed only at the limit price or better.

Risk of Non-Execution:
If the market price moves past the limit price without filling the order, the trade may not be executed, leaving the position open.

Reduced Slippage:
By specifying a limit price, you reduce the risk of slippage, as the order will not be executed at a less favorable price.

Complexity:
Stop-limit orders are more complex than simple stop or limit orders, requiring careful consideration of both stop and limit prices.

Loss Limitation:
Stop-limit orders can limit potential losses by setting a predefined stop and limit price, providing a structured exit strategy.

Short-term Fluctuation Risk:
Similar to stop orders, stop-limit orders can be triggered by brief price fluctuations or “spikes,” potentially leading to premature exits.

Submitting a Stop Limit Order via LYNX

LYNX+
Trader Workstation
Trading App

In LYNX+, you can find specific securities using the search bar located in the top right corner. You can search by the name, ISIN code, or specific ticker of the product.

Once you have selected the product you want to trade, you will be taken to the product overview. Here, in the top right corner, you can click on Buy or Sell if you wish to trade this stock immediately. Specify the quantity and select the time in force for your order.

Select STP LMT from the Order Type dropdown menu.

After customizing the order ticket to your preferences, you can review the order details in the Summary.

To proceed, click Send Order to submit or Cancel to discard the order.

After logging into TWS, open the order ticket by clicking Order in the top left. If you have a certain security selected, it will automatically open an order ticket for that security. You can change the underlying by typing the name, ticker code, or ISIN in the Financial Instrument column at the top of the order ticket.

Choose the action (buy or sell), specify the quantity, the destination, and select the time in force for your order.

Select STP LMT from the Order Type dropdown menu.

In the bottom left of the order ticket window, you can press Preview to look at the summary of your order. Then click on Transmit to submit the order or on Close to close the preview.

To search for a product, tap the Search icon in the top right. Enter the name, ISIN, or ticker symbol. Tap a search result to open the product’s page.

By clicking on Sell or Buy, you will access the order ticket.

Specify the quantity and set the validity period of your order under Time in Force. Select STP LMT as an order type.

Before submitting the order, you can check the parameters of your order via the Preview/Calculator icon on the bottom right. To submit the order, swipe right over the Slide To Submit Sell/Buy button.

Tips before submitting a Stop Limit Order

When submitting a stop-limit order, consider several key points to achieve the best possible execution and minimize potential issues.

Liquidity

Ensure the asset you are trading has sufficient liquidity.

Higher liquidity generally means tighter bid-ask spreads and less impact on the market price when executing a stop-limit order.

Timing

Stop-limit orders are best placed during regular trading hours when liquidity is highest. Placing orders outside of these hours can result in poor execution prices.

Also, avoid placing stop-limit orders during major economic announcements or earnings reports, as these events can cause rapid price fluctuations.

In highly liquid markets, large orders may be filled in multiple parts, possibly at different prices.

Monitoring

The bid-ask spread is the difference between the highest price a buyer is willing to pay and the lowest price a seller is willing to accept.

A wider spread can result in higher costs for executing a stop-limit order. Monitor the spread and consider its impact on your trade.

FAQ

With Stocks IBKR only allows Limit, Trail Limit and Stop Limit order types to be active that are configured to work in the Pre-Market and After-Market trading hour sessions. Market, Stop and Trail orders will only work during the Regular Trading Hours depending on the exchange.

For Derivates it could differ, please check the following page (Outside Regular Tradinghours ) to see if other order types are suitable outside regular trading hours.

If you wish to limit your losses in a particular product, you can place a stop or stop-limit order. Once the price of a stock reaches your stop price (this is called triggering an order), an order is then sent to the exchange to buy or sell (depending on whether you hold a long or short position). The difference between a stop and a stop-limit order is the type of order sent to the market once your stop price is reached. Once triggered, the order cannot be modified or removed.

With a stop order, a market order is generated, indicating that you wish to buy or sell a predetermined number of pieces at the best current price. With a stop-limit order, a limit order is generated, indicating the price at which you wish to buy or sell these pieces.

Stop-limit orders are best used when you want to protect against significant losses or secure profits on a position while having control over the execution price. They are ideal in markets where price protection and execution control are more important than immediate execution.

Before placing a stop-limit order, consider the current market conditions, potential price volatility, and your willingness to accept the risk of non-execution. Assessing these factors can help you decide whether a stop-limit order is the best choice for your trade.

Yes, you can cancel a stop-limit order any time before it is triggered. Once the stop price is reached and the order becomes active, it remains a limit order, providing some time to cancel if the limit price is not yet met.