A stop-limit order will allow a trader to place a limit order to buy or sell when an asset’s price reaches a specified value (the stop price). The order type can be used as a stop entry (i.e., to initiate a new position at a specified level) or a stop exit (i.e., to sell current assets or cover a short position).
How does a stop-limit order type work?
The stop-limit is triggered when the last traded price on Coinbase Exchange equals or crosses the stop price. At this time, the Prime trading algorithm will initiate the trade as a limit order using its standard multi-venue logic.
If all or parts of a trade cannot be executed within the limit price, the order will rest within Prime until that parameter can be met. If that parameter is met, the order will execute as instructed.
What are the parameters for the stop-limit order?
Traders will initiate and order via API and/or input the stop-limit order in the Prime trading platform. They will need to specify the size, stop price, limit price, and time in force (e.g., good til canceled, good til date). Traders can also specify whether they want the trade to be an iceberg order if the limit price is not available when the stop is triggered.
To protect traders from executing large orders in volatile markets, the limit price must be within 1% of the stop price.
Orders will reject if the limit price is closer to the market than the stop price (e.g., a stop-limit buy with the limit above the stop price), if the limit price is not 1% from the stop price, or if the stop price is too close to the market (stop prices must be more than 50bps from current quotes).