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One of the greatest drawbacks of using stop-limit order in CFD trading is that it doesn’t always get the price that you desire. For instance, you want to purchase a stock at $45 and you decide to place a stop limit at $40 to sell it. By doing so, you are placing a conditional order in which it only gets executed once the conditions are met. The stop-limit order can only be filled once it meets the parameters that you personally set. These parameters are related to the outside price of the trade, the target price of the trade as well as the specified timeframe.

Stop-Limit Order vs. Stop Order

It is important to understand the differences between stop-limit order and stop order so you will know which one to use. Although they sound similar, they have different conditions and features. For stop order, once it is established, this means that the stock that you hold will be automatically sold out at a particular price or beneath it. Stop order also triggers a market order whenever a particular price is reached at a specific point.

Meanwhile, stop-limit order allows greater control over a specific order as to when it gets filled by agreeing to a couple of acceptable prices. There are two prices included in the stop-limit order – the stop price which is set at the start of the trade and the limit price which is the outside price target.

Stop-limit order only gets triggered when the stop price is reached. Then, it becomes a limit order that sells at a limited price or way better.

Why are there some stop-limit orders that don’t sell?

Make the stop-limit work accordingly, another trader in the market must bid in the range of your stop price as well as your limit price. But, in case there isn’t a bid, there won’t be the execution of trades too. This mostly happens on widely traded stocks that have high volume but are thinly traded or those under volatile markets.

Take note that shares aren’t going down that easily like a thermometer. Although, they can jump into a specific price when the bids and asks don’t match up. There’s a huge possibility for a stock traded at $43 to fall directly to $39 without even getting into the $42, $41, $40 marks.

In live CFD trading, these instances don’t always happen. There’s still a huge chance for your stop-limit order to be filled on a single trade or several trades. This means that this order might not guarantee a sell but it ensures you of getting the price that you want to sell with.

Such risk management tools are very important for your trades. Once you use it correctly, you will find that trading can be less dramatic compared to the time when you first entered the market. All you have to do is to understand these orders so you will know which one to use in CFDs. Other types of orders include limit order, market order, limit order, stop order, and buy stop order.

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