The stop limit sell order is executed only if the sell price (bid) reaches the stop limit or undershoots it and lies above the set limit at the same time. If stop limit and limit are undershot simultaneously, there is no execution until the limit is undershot again.
After the stop limit is undershot, only the limit remains relevant as far as the execution is concerned. An execution can therefore also take place above the stop limit.
A stock is currently at 100 euros. The trader wants to restrict the risk of this position and selects a stop limit of 95 euros for their stop limit sell order. At the same time, the trader must also specify up to what price to accept a sell. This is done by entering a limit of 94 euros, for example.
The order is thus only activated when the sell price of the stock falls to 95 euros or less – in this case to 94 euros. As long as the stock is listed above 95 euros, the order awaits execution and will remain in the system until the end of validity.
After the stop limit sell order turns into a limit order upon reaching the stop limit, the order can also be executed above 95 euros, but not under 94 euros, after having reached the stop limit.