Stop-limit orders are entered with both stop price and limit price.
Stop Price: A limit order will be placed when the stop price level is reached.
Limit Price: The limit order will only be executed at the limit price or better.
Use case of price upswing
A stop-limit order to buy can be placed during the market upswing.
For a stop-limit order to buy: stop price ≥ current market price
Example: Current BTC price is 3,000 USDT, and the resistance level is around 3,200 USDT. If the user wants to buy in when the BTC price breaks through resistance level, the stop-limit order can be set up as below:
Stop price: 3,200 USDT
Limit price: 3,250 USDT
When BTC price reaches 3,200 USDT, a limit order will be placed to buy BTC at 3,250 USDT or lower.
Use case of price downswing
A stop-limit order to sell can be placed during the market downswing.
For a stop-limit order to sell: stop price ≤ current market price
Suppose that the current price of BTC is 3,000 USDT, and the support level is around 2,800 USDT. If the user wants to sell when the BTC price falls below the support level, the stop-limit order can be set up as below:
Stop price: 2,800 USDT
Limit price: 2,750 USDT
When BTC price dips beneath 2,800 USDT, a limit order will be placed to sell BTC at 2,750 USDT or higher.