Stop-limit orders are similar to normal limit orders, but become active once the market has reached a predefined stop or trigger price that you set. Once the trigger condition has been met, a limit order will be posted in the order book at the specified limit price.
A stop-limit order has two price points - the stop price and the limit price:
A stop price refers to the condition of the specified target price for the trade,
and a limit price refers to the instruction for a trader to exit their position.
Once the stop price is reached, a limit order is automatically placed in the order book to buy or sell at the limit price or better.
Stop-limit orders will guarantee a price limit, but not a fill. In a fast-moving market, the stop price may trigger, but the market might move beyond the specified limit order price.
Let’s use an example: A Trader has 1 BTC purchased at €200, and wants to sell it at a higher price. They place a sell stop-limit order with a stop price of €205 and a limit price of €215. If a rapid decline takes the price below the stop price of €205, then a limit order is created at €215. Your order will now be active in the order book and will wait for the price to return to this level or above before being sold.
The most significant benefit of a stop-limit order is that as a trader, you can protect your trades from volatility in the market. Stop-limit orders offer an extra layer of risk mitigation by allowing you to specify an exit price.
Here’s how to use stop-limit orders
Log in to the Luno Exchange
On the web, go to the place order ticket section to the right, and on mobile, select PLACE ORDER at the bottom
On the Place Order ticket, select Stop-limit
Select either Buy or Sell, enter the Stop Price, the Limit Price and an amount
Select (Buy/Sell) to place your order
Confirm your order by selecting PLACE ORDER on the pop-up