How it works
You set two prices: the stop trigger and the limit. The order sits dormant until the market touches the trigger. At that moment, it activates as a limit order at the limit price. It will fill at the limit or better, never worse. If the market gaps through the limit, the order does not fill, and the original position remains open.
Example
You hold a long EUR/USD at 1.0856. You set a stop-limit with trigger 1.0820 and limit 1.0815. Price drops to 1.0820 and activates the order. It will sell at 1.0815 or better. If price stays between 1.0820 and 1.0815, you fill. If price gaps from 1.0820 straight to 1.0810, your order does not fill, and you remain long while the market continues lower. You gave up gap protection in exchange for not selling at a panic price.
Why it matters
Stop-limit is the right choice when you want a stop level but refuse to accept catastrophic slippage in a fast move. It is the wrong choice when downside protection matters more than fill price: in a true crash, the stop-limit may leave you holding the position. Use it on liquid instruments during normal market hours, not on news releases or weekend opens.
