Once triggered, a stop order becomes a market order, which will generally result in an execution. However, a specific execution price or price range isn't guaranteed—the resulting execution price may be above, at, or below the stop price itself.
A limit order allows you to put in an order and only exercise it at the price you specify or better (lower if buying, higher if selling). The downside is that the trade isn't guaranteed to happen if that price is not available on the market.
With limit orders, your order is guaranteed to be filled at the specified order price or better. The only guarantee, if a stop-loss order is triggered, is that the order will be immediately executed and filled at the prevailing market price at that time.
Always sell a stock it if falls 7%-8% below what you paid for it. This basic principle helps you always cap your potential downside. If you're following rules for how to buy stocks and a stock you own drops 7% to 8% from what you paid for it, something is wrong.
When the price drops or rises very fast, a market stop loss might execute at worse prices, and the limit stop loss might not execute at all. Check the next section to find out more about limit stop losses. Market orders are there to buy or sell something as fast as possible at the best available price right now.
Limit orders have no obvious disadvantages. However, the lack of a guarantee that a transaction will be completed is a disadvantage of using limit orders. If the market price has not reached the limit price level, the order will not be executed and the transaction will not be opened.
Why Is My Limit Order Not Being Filled? Bear in mind that, for a buy limit order, you've set the highest price at which you want to buy shares. Thus, your order fills only if the market trades at that price or better. If the market is trading above your limit price, there's no guarantee your order will be executed.
Stop-limit orders enable traders to have precise control over when the order should be filled, but they are not guaranteed to be executed. The stop price dictates the price whether the order is triggered, then the limit price dictates the price at which the order is filled.
During volatile market conditions, these orders may be executed at prices significantly below the investor's price expectations (above for buy stops), especially if the market is moving rapidly. Another risk to consider is the fact that stop orders may be triggered by a short-lived, dramatic price change.
In case of extremely less volume, where there are not enough buyers and sellers (referred to as an illiquid contract), the Stop Loss will not be executed as the stock may not have enough buyers/sellers at a defined stop-loss limit price by you for the order to be executed which is also known as 'Market depth'.
One disadvantage of the stop-loss order concerns price gaps. If a stock price suddenly gaps below (or above) the stop price, the order would trigger. The stock would be sold (or bought) at the next available price even if the stock is trading sharply away from your stop loss level.
What Happens If a Buy Limit Order Is Not Executed? If a buy limit order is not executed, it will expire unfilled. The order could expire at the end of the trading day or, in the case of a good 'til canceled (GTC) order, it will expire once the trader cancels it.
A stop-limit order typically ensures that you get the price you set, but it doesn't guarantee that your trade will go through. As a result, you could be left holding shares worth far less than you anticipated. Employ a stop-limit order when you are willing to hold the shares if you can't get your desired price.
However, limit orders for the standard trading session (9:30 a.m. to 4 p.m. ET) allow a trader to determine the duration. Day limit orders expire at the end of the standard trading session and do not carry over to after-hours sessions.
Keep in mind, short-term market fluctuations may prevent your order from being executed, or cause the order to trigger at an unfavorable price. For example, if the market jumps between the stop price and the limit price, the stop will be triggered, but the limit order won't be executed.
A triggered GTT is executed only if the limit price order is filled on the exchange. For better chances of execution, place the limit price above the trigger for buy GTT orders and below the trigger for sell GTT orders. The further away the price is from the trigger, the more likely the execution.
A limit order guarantees that an order is filled at or better than a specific price level. A limit order is not guaranteed to be filled, however. Limit orders control execution price but can result in missed opportunities in fast-moving market conditions.
A limit order is an order to buy or sell a stock with a restriction on the maximum price to be paid (with a buy limit) or the minimum price to be received (with a sell limit). If the order is filled, it will only be at the specified limit price or better. However, there is no assurance of execution.
Limit order traders benefit from favorable execution prices if someone hits their order. However, they face two order submission risks. On the one hand, the limit order trader incurs a non-execution risk, which is the likelihood that his/her order is not executed, and thus the trader earns no profit.
Investors may cancel standing orders, such as a limit or stop order, for any reason so long as the order has not been filled yet. Limit and stop orders may stand for hours or days before being filled depending on price movement, so these orders can logically be canceled without difficulty.
A stop order typically ensures that your trade is executed, but it does not guarantee the price. It can provide protection during regular market hours, but in a volatile market, you have no control over the price you'll get and you may face a larger than anticipated loss.
Limit orders are preferable to stop orders, because limit orders may result in positive slippage as orders can be executed at the requested price or a better price, while stop orders may result in negative slippage, as orders can be executed at the requested price or a worse price.
Mental stop losses
Some traders only use “mental stops” in their heads instead of placing real orders. This strategy is only possible if you can always focus on the market the whole time. You have to keep an eye on prices and sell if needed. This gives more flexibility but risks forgetting in the heat of the moment.