· EXECUTION
Stop market versus stop limit orders
A stop market order fills at any price once triggered. A stop limit order caps the price and may not fill. A worked ES example counts both in ticks.
SHORT ANSWER
A stop market order becomes a market order when price reaches the stop, so it fills against whatever bids or offers are resting. A stop limit order becomes a limit order with a worst price, so it never fills beyond that price but may fill partly or not at all. One gives up price control, the other gives up the certainty of a fill.
Stop market and stop limit orders differ in what happens after the trigger. A stop order waits outside the book until price reaches the stop price. A stop market order then becomes a market order. A stop limit order becomes a limit order with a worst acceptable price. The earlier note on market, limit and stop orders on a futures DOM covers the basic stop. This note runs the same fast move through both versions and counts the result in ticks and dollars.
The setup
The example uses the E-mini S&P 500 future, ES. One tick is 0.25 points and is worth $12.50 per contract. You hold 5 contracts long, and you want an exit if price falls to 5,010.00.
Price is falling fast. When a trade prints at 5,010.00 and triggers the stop, this is the invented bid side of the book.
| Price | Bids resting |
|---|---|
| 5,010.00 | 2 |
| 5,009.75 | 0 |
| 5,009.50 | 1 |
| 5,009.25 | 4 |
| 5,009.00 | 15 |
In this example the 5,009.75 row holds no bids at all. Two minutes later price trades at 5,005.00.
How the stop market order fills
A sell stop market order at 5,010.00 becomes a market order to sell 5 contracts as soon as the stop triggers. It takes the bids in price order.
| Price | Bids resting | Your fill | Ticks below stop |
|---|---|---|---|
| 5,010.00 | 2 | 2 | 0 |
| 5,009.50 | 1 | 1 | 2 |
| 5,009.25 | 4 | 2 | 3 |
All 5 contracts fill. The average exit is 5,009.60. The slippage, the gap between the stop price and the fill prices, is 1 × 2 ticks plus 2 × 3 ticks, or 8 ticks in total. At $12.50 a tick that costs $100 across the position.
The stop price set when the exit started. The resting bids set the fill prices.
How the stop limit order fills
Now use a sell stop limit order with a stop of 5,010.00 and a limit of 5,009.50. When the stop triggers, it becomes a limit order to sell 5 contracts at 5,009.50 or better.
| Price | Bids resting | Your fill |
|---|---|---|
| 5,010.00 | 2 | 2 |
| 5,009.50 | 1 | 1 |
| 5,009.25 | 4 | none, below the limit |
Three contracts fill, at an average of 5,009.83. The other 2 contracts become a sell limit order resting on the offer at 5,009.50. Price keeps falling and trades at 5,005.00 two minutes later. You are still long those 2 contracts.
From 5,009.50 to 5,005.00 is 4.5 points, or 18 ticks. On 2 contracts that is 36 ticks, an open loss of $450 beyond the limit price. The stop market order exited them at 5,009.25 instead.
The two results side by side
| Measure | Stop market | Stop limit |
|---|---|---|
| Contracts exited | 5 of 5 | 3 of 5 |
| Worst fill | 5,009.25 | 5,009.50 |
| Slippage on filled contracts | 8 ticks, $100 | 2 ticks, $25 |
| Contracts still open at 5,005.00 | 0 | 2 |
The stop limit order had less slippage on the contracts it filled. It also left 2 contracts in the market while price moved 18 more ticks. Neither result is better in every case. If price had bounced back to 5,011.00, the 2 resting contracts would have filled at 5,009.50 on the way up, and the stop limit would have exited all 5 at a better average.
When price opens beyond the limit
An opening gap makes the difference larger. Suppose the market reopens after a pause and the first trade prints at 5,004.00. The stop market order triggers and sells into the bids near 5,004.00, 24 ticks below the stop. The stop limit order triggers too, but its limit of 5,009.50 sits above every bid. None of the 5 contracts fill.
Where the stop waits
Some platforms send stop orders to the exchange. Others hold the stop on their own servers and send a market or limit order only when it triggers. The two behave differently if your connection drops, and a later note covers that case. Your platform's documentation states which price triggers the stop and where the order waits. The glossary defines the order terms if your platform labels them differently.
A check you can run
In simulation, place a stop market and a stop limit order for one contract each, at the same stop price, with the limit two ticks beyond it. Do this on five fast moves. For each pair, write down the fill prices, how many ticks each filled from the stop, and whether the stop limit filled at all. Five pairs show you how often your contract moves more than two ticks through a stop before the book refills.
Questions
What is the difference between a stop market and a stop limit order?
Both wait outside the book until price reaches the stop. A stop market order then becomes a market order and fills at the available prices. A stop limit order becomes a limit order and fills only at the limit price or better.
Can a stop limit order fail to fill?
Yes. If price moves through the limit before enough size trades there, the rest of the order rests in the book unfilled. If price opens beyond the limit, none of it fills.
Why did my stop market order fill below the stop price?
When the stop triggered, there were not enough bids at the stop price to fill the whole order. The rest filled against the next bids down the book.
How far from the stop should the limit price be on a stop limit order?
That depends on how much slippage you accept against the risk of an unfilled exit. Measure how many ticks the book thins out during fast moves on your contract, then decide.
Educational content about market data and charting software. It is not trading or investment advice. Trading involves risk.