The short answer
Both orders wait, inactive, until the market reaches a price you set (the stop price). What happens next is the difference:
- A stop order (often called a stop loss) becomes a market order. It aims to get you out, at whatever price is available.
- A stop limit order becomes a limit order at a second price you chose (the limit price). It only fills at that limit or better.
So you are choosing between certainty of exit and control of price. You cannot fully have both. FINRA's investor guide Stop Orders: Factors to Consider During Volatile Markets describes the same trade-off: a triggered stop's fill can be markedly different from the stop price, and a stop limit order has no guarantee of execution.
Side-by-side comparison
| Stop (stop loss) | Stop limit | |
|---|---|---|
| Prices you set | Stop price | Stop price and limit price |
| Once triggered becomes | Market order | Limit order |
| Will it fill? | Usually, if there are buyers (for a sell) | Only at the limit or better; may not fill |
| Fill price | Can be worse than the stop | No worse than the limit |
| Main risk | Slippage, especially on gaps | Being left in a falling position |
Exact behaviour varies by broker, exchange and market. Brokers differ in which prices trigger a stop, whether stops work outside regular hours, and how they handle partial fills. Check your own broker's order documentation.
Both orders can be used on the buy side too: a buy stop above the market can trigger an entry on a breakout or cover a short position, with the same trade-off between filling and price.
Worked example: a gap down
You hold 100 shares bought at $52.00. You want out if the price falls to $50.00, a planned loss of 100 × $2.00 = $200 (1R). Overnight, bad news: the stock opens at $46.00 and keeps sliding to $44.00 by midday. These prices are illustrative.
With a sell stop at $50.00: the open at $46.00 is below the stop, so the order triggers and becomes a market order. Suppose it fills near $46.00. Loss: 100 × ($46.00 − $52.00) = −$600, or −3R, three times the planned loss.
With a sell stop limit, stop $50.00, limit $49.50: the order triggers, becomes a limit order to sell at $49.50 or better, and does not fill because the price is far below $49.50. You still hold the shares. At $44.00 the open loss is 100 × ($44.00 − $52.00) = −$800, and it keeps changing with the price.
Neither outcome is "right". The stop gave a bad fill; the stop limit gave no fill. On a day where the stock rebounded, the comparison could reverse. The point is to know which risk you are choosing.
To keep this comparable with your other trades, log the stop limit case honestly when you finally exit. If you sold at $44.00 the next day, that trade is ($44.00 − $52.00) ÷ $2.00 = −4R, and it belongs in your statistics as such.
Why gaps and fast markets matter
A stop price is a trigger, not a guarantee. Markets do not always trade through every price: they can gap between one session's close and the next open, or jump during news. When that happens:
- A stop order triggers at the first available price beyond the stop and fills as a market order, which may be well past your stop.
- A stop limit order triggers too, but if the market is already past your limit, it rests unfilled.
- Short, sharp swings can trigger a stop that the price then recovers from, which FINRA's guide linked above also notes.
This is why position sizing controls the loss at the stop, not the worst possible loss.
Choosing the limit offset on a stop limit
If you use a stop limit, the gap between stop and limit decides how much slippage you accept in exchange for a fill:
- Zero offset (limit equals stop): the most price control, the highest chance of no fill in a fast move.
- Wider offset: more likely to fill, with more potential slippage up to the limit.
There is no correct offset for everyone. It depends on the instrument's typical spread and volatility and on how much a non-fill would cost you. Some traders use a stop limit only where they plan to watch the position and act if it does not fill.
Questions to answer before you place either order
Order type is a practical decision, not a philosophical one. These questions help you think it through for your own situation:
- Will you be watching? If an unfilled stop limit would go unnoticed for hours, the risk of being left in the position matters more.
- How liquid is the instrument? In thinly traded stocks or options, spreads are wider and a market order after a trigger can fill further from the stop.
- Is there a known event? Earnings and other scheduled news raise the chance of a gap that jumps straight past both stop and limit.
- Does your broker support it the way you assume? Check which price triggers the stop, whether it is active outside regular hours, and how long it stays working (day or good till cancelled).
- What is the most you could lose if it does not fill? For a stop limit, imagine the price keeps falling after it gaps past your limit.
Write the answer in your journal note when you enter the trade. Over time you will see whether your choice matched what actually happened.
Measure your real slippage in a journal
You do not have to guess how much your stops cost you. For every trade exited by a stop, log three numbers:
- Planned stop price
- Actual fill price
- Slippage = fill − stop (for a long position, negative means a worse fill)
Then express each stopped trade as an R-multiple: R = (exit − entry) ÷ (entry − stop). In the gap example, ($46.00 − $52.00) ÷ ($52.00 − $50.00) = −3R. If your stopped trades average −1.2R instead of −1R, the extra 0.2R per loss is a real cost that belongs in your expectancy. The R-multiple calculator checks one trade; a journal shows the pattern.
This guide explains order mechanics for education only. It is not advice on which order type to use.