What does the limit in a stop-limit do?

[9thsky]

When selling, if the stop is 31,100 and the limit is 31,000, isn't it going to try to fill as soon as it reaches 31,100? What's the 31,000 for? And what happens when it gets below it before the order fills?

[1715569850]

1715569850

[jackg]

If it gets below then the order stays.

It just pushes a limit order out at 31000 if 31100 is crossed.

This means you might get liquidated if you don't forget to change it (if you're leveraged) or it'll remain open until crossed if not using leverage.

[Xavofat]

When selling, if the stop is 31,100 and the limit is 31,000, isn't it going to try to fill as soon as it reaches 31,100? What's the 31,000 for? And what happens when it gets below it before the order fills?

For example, let's say you're trading BTC.  The stop is 31,100 and the limit is 31,000.  This means that if BTC falls below the price of 31,100, the exchange will automatically place an order to sell.  However, if the price falls so rapidly or with so little volume that it drops below your limit of 31,000 before the order fills, it won't be sold because the limit indicates you're not willing to sell if it falls that low (you would then wait for it to rise again).

The risk is that if you set your limit too high on a stop-limit order, your order to sell will not be filled because the price will rapidly fall below your limit.  You should only place a stop-limit order if you're sure of what price you're not willing to sell under.

It's a risky strategy because the order might not get filled if the price is dropping too quickly and it could continue to fall.

[crwth]

Basically, it's what the above people have said so I guess what you can take-away is that it's better to use another type of order.

Are you using futures and with Binance? Because what I'm thinking is that it's better to use Stop-Market instead of limit so that it would surely be filled once it reaches that price. You won't have to worry about it.

[9thsky]

Basically, it's what the above people have said so I guess what you can take-away is that it's better to use another type of order.

Are you using futures and with Binance? Because what I'm thinking is that it's better to use Stop-Market instead of limit so that it would surely be filled once it reaches that price. You won't have to worry about it.

Interesting. Is there such thing in Binance?

[Tytanowy Janusz]

Basically, it's what the above people have said so I guess what you can take-away is that it's better to use another type of order.

Are you using futures and with Binance? Because what I'm thinking is that it's better to use Stop-Market instead of limit so that it would surely be filled once it reaches that price. You won't have to worry about it.

"you can take-away is that it's better to use another type of order." - NO! He should "take-away" the main idea how stop-limit order works and to learn how to set it in correct way. Not to give up on it and move back to simpler order that expose him to different types of risks.

"Stop-Market instead of limit so that it would surely be filled once it reaches that price. You won't have to worry about it. " - Stop-Market order expose you to flash crash attack where whale create buy order at -99% of current price and then eat all orderbook filling 1 big order. All stop-market orders fills into his buy order than because there is nothing above him, everyone with stop-market order are at 99% loss.


https://media.consensys.net/why-the-gdax-ether-flash-crash-isnt-surprising-and-what-it-means-for-crypto-2618c98779f6

good luck being filled at the bottom. Selling ETH for 10 cents.

[crwth]

"you can take-away is that it's better to use another type of order." - NO! He should "take-away" the main idea how stop-limit order works and to learn how to set it in correct way. Not to give up on it and move back to simpler order that expose him to different types of risks.

I should've been more specific. It should've been to learn the necessary type of order to use. Depending on what he should use, he should use it properly. Like you said.

Yeah, you could have those things but that's unusual to put the stop market at 10 cents when the price in your chart says $397. That's just dumb. You should input the "stop price" at the correct percentage or at the correct price like $360 or something. Make sure to use the "Mark Price" as the trigger.

[Tytanowy Janusz]

Yeah, you could have those things but that's unusual to put the stop market at 10 cents when the price in your chart says $397. That's just dumb. You should input the "stop price" at the correct percentage or at the correct price like $360 or something. Make sure to use the "Mark Price" as the trigger.

The problem with such attack is that it affect not those who put stop-market order at 10 cents (what is in fact dump) but those who set stop-market at "$397" but due to attack and empty order book their order was filled on first bid in order book that is at 10 cents.

Lets take this order book as example:


Its consolidated orderbook of BNB/USDT trading pair. Now how such attack looks like?

1- whale put big buy order at 50$
2- whale create huge 14 mln $ sell order with min price at 51$
3- exchange take his order and pass it to matching engine and fill all orders from orderbook. After filling all order book from 130$ to 51$ this order is filled. First bid after this dump is 50$. Its from whale that started attack
4- at this point, the exchange starts processing automatic stop-limit orders and stop-market orders and pass them to matching engine
5- stop-limit orders are filling orderbook, stop-market orders are filling bad whale bag at extreme discount.

High risk attack? Yea but... for some people its zero-risk attack. You know who? Crypto exchanges that knows exactly how much money is in stop-market orders currently and how much you need to dump to trigger them. Simple algo and they can track and constantly calculate profitability of such attack with 100% success rate.

conclusions? Stop-market order expose you to unpredictible loss. In some case bigger than not having stop-loss order at all.