What is stop-limit or trigger-limit order?
A stop-limit order is a conditional order placed at a specific price with a range. It is an extension of the stop/trigger order where buy orders are placed above the market price and sell orders are placed below the market price. But unlike a stop order, you must set a limit price along with the stop/trigger price. When the current market price enters the price range you set (i.e., the price between the stop and limit price), the order will be executed. On the contrary, if the price of the scrip does not enter the set price range, the order will not be executed.
Let’s say you own shares of an Indian company that are currently trading at ₹3,000 per share. You want to sell your shares if the price falls to ₹2,700 or lower, but you don’t want to sell for less than ₹2,600 per share. In this case, you could place a stop-limit order with a stop price of ₹2,700 and a limit price of ₹2,600.
If the stock price falls to ₹2,700 or lower, your stop-limit order would be triggered and the order will be executed at the best available price between ₹2700 - ₹2,600. However, if the X ltd. stock falls to ₹2,700 but does enter the range and goes below ₹2600, the order would not be executed.
To know the procedure to place trigger-limit orders, refer to this article.
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