A stop price (an order to purchase or sell a crypto whenever the price reaches a certain level) and a limit price are first specified by the user (an order to buy or sell a specific number of crypto when the price reaches a specific point).
By specifying the highest or lowest prices for each transaction, a stop-limit order gives users more control.
A limit order that directs the market maker to buy or sell the crypto at the limit price is triggered when the crypto price reaches the specified stop price.
By identifying the level at which the investor is unable to accept losses, it helps to restrict losses.
When crypto traders are not actively following the market, they utilize stop-limit orders, which help initiate a buy or sell order when the security hits a certain price. The order is automatically triggered once the price has been reached.
How does the stop-limit order work?
Once the stop-limit order is placed by the user to the crypto exchange, it is recorded on the order book. Until it is activated, canceled, or expires, the order is still in effect. Users who place stop-limit orders must indicate whether they want the order to be valid for the current market or the futures markets, and for how long.
For instance, if a user selects a one-day validity time, the order would expire if it is not triggered at the end of the trading session. The trader can also choose a good-till-canceled (GTC) order validity term, which is valid for future trading sessions until it is activated or canceled.
There are two types of primary stop-limit orders that users follow:
Buy Stop Limit
A buy stop limit is an order placed by a user to buy a crypto at a specific price. It helps users control the purchase price of a crypto that is acceptable to buy.
After the user selects the greatest price, they are ready to pay for a stock, a stop price and a limit price are then defined.
Sell Stop Limit
A sell stop limit is a conditional order that users set to sell the crypto when the price falls up to a specific price – i.e., stop price.
A stop price is a price at which the limit orders to sell is activated, whereas the limit price is the lowest price that the trader is willing to accept.
