How Does a “Stop Limit” Order Combine a TIF Concept with Price Control?
A stop limit order is a two-part order: a stop price and a limit price. When the stop price is reached, the order is activated and becomes a limit order.
This limit order then inherits a Time in Force (TIF) instruction (e.g. Day, GTC, IOC).
The TIF dictates how long the limit order remains active. Thus, the stop limit order uses the TIF to control the execution lifespan of the order after its activation, ensuring the trade does not occur at a worse price.
Glossar
Stop Price
Trigger ⎊ A stop price, within cryptocurrency derivatives and options trading, functions as a conditional order execution point, initiating a market or limit order when the specified price level is reached.
Control
Mechanism ⎊ Control, within cryptocurrency, options, and derivatives, represents the capacity to influence price discovery and execution, often through order flow management and market-making activities.
Limit Order
Instrument ⎊ A limit order is an instruction to trade an asset at a specified price or better, providing the trader with precise control over the entry or exit cost, unlike a market order.
Limit Price
Concept ⎊ A Limit Price is a specific price level set by a trader for a limit order, defining the maximum price at which they are willing to buy a financial instrument or the minimum price at which they are willing to sell it.
Stop Limit Order
Execution ⎊ A stop limit order, within cryptocurrency, options, and derivatives markets, functions as a conditional instruction to execute a trade only if the asset’s price reaches a specified stop price, then triggers a limit order at or better than the limit price.