Series 66: 6.5.1.4 Stop-Limit Orders

6.5.1.4  Stop-Limit Orders

One disadvantage of a sell stop-loss order is that if a stock has gone into a free fall, the investor may end up selling his securities at a very low price once the trigger price has been passed. To prevent this, the investor could instead enter a stop-limit order. Stop-limit orders are orders that become limit orders after the market passes the trigger price. Thus, a stop-limit order involves two prices, the trigger price and the limit price. An investor uses a sell stop-limit order when he wants to protect against a downward trend in a long position but wants to put a limit on how low he is willing to sell his stock for. If the stock passes the trigger price