Definition of stop-limit order

order to a securities broker with instructions to buy or sell at a specified price or better (called the stop-limit price) but only after a given stop price has been reached or passed. It is a combination of a stop order and a limit order. For example, the instruction to the broker might be "buy 100 XYZ 55 STOP 56 LIMIT" meaning that if the market price reaches $55, the broker enters a limit order to be executed at $56 or a better (lower) price. A stop-limit order avoids some of the risks of a stop order, which becomes a market order when the stop price is reached; like all price-limit orders, however, it carries the risk of missing the market altogether, since the specified limit price or better may never occur. The American Stock Exchange prohibits stop-limit orders unless the stop and limit prices are equal.