Stop-Limit Orders explained

Team Luno
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2 minute read

We’ve added stop-limit orders to the Luno Exchange and mobile App 🥳

 

This is an important feature for crypto traders, one that helps greatly in mitigating against some of the risks associated with price volatility. It’s a feature we know our community will be excited about and we’ve worked hard to bring it to you.

 

Here’s a quick explainer of what stop-limit orders are, their purpose, and how to implement them on our Exchange.

 

What is a stop-limit order?

 

A stop-limit order is similar to a limit order – a type of order where you buy or sell an asset at a given price or better. In the case of stop-limit orders, they only become active in the order book once the stop price has been triggered.

 

How does a stop-limit order work?

 

A stop-limit order requires two price points: the stop price and the limit price.

 

  1. A stop price refers to the condition of the specified target price for the trade.
  2. 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.

 

It’s important to remember 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 look at an example: A Trader has 1 BTC purchased at $200. 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 until the price to return to this level or above before being sold.

 

The benefits of stop-limit orders

 

The most significant benefit of a stop-limit order is that the traders can protect themselves from large price movements that could render a trade unprofitable. In order to 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.

 

How to use stop-limit orders on the Luno Exchange

 

  1. Login to the Luno Exchange
  2. From the Place Order ticket, select Stop-Limit Order
  3. Select Buy or Sell and fill in a Stop Price, Limit Price and an amount
  4. Press (Buy/Sell) to place an order

 

 

5. Confirm your stop-limit order

 

 

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Team Luno

On our way to the moon, we write about all things crypto. And don’t forget we’re humans too. Our blog conveys the views of Luno and the many unique opinions and characters within our team. We’ll never provide you with financial advice, and we urge you to conduct your own research before purchasing or trading any cryptocurrencies. It’s a brave new world out there, and the market can be volatile at times, so never trade with funds you can’t afford to lose. Want to let us know how much you love our blog? Tweet us @lunomoney.

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