A buy stop limit is used to purchase a stock if the price hits a specific point. It helps traders control the purchase price of stock once they’ve determined an acceptable maximum price per share. A stop price and a limit price are then set once the trader specifies the highest price they are willing to pay per stock. The stop price is a price that is above the market price of the stock, whereas the limit price is the highest price that a trader is willing to pay per share.
For example, if John intends to buy ABC Limited stocks that are valued at $50 and are expected to go up today, he can put a stop price at $55. It means that once the price reaches $55, the trade is executed, and the order is turned into a market order. If the limit order is capped at $60, the order is processed after reaching $55, and if it exceeds $60, it is not fulfilled.
I could just set a limit order for the same price and not evne bother using the stop limit order.
And why would I want to buy in as the price goes up? You buy low and sell high right?
Like the other guy posted - supposed you've determined a resistance line at ~$100. The previous resistance was at $80, the stock shot through and then it hit $100 and came back down. You sold at $98. $80 is the new support. And in your mind it should come back down to $80 (where you'll buy again), before it tries to run up and break through $100. BUT if it breaks through $100, you're pretty sure it'll go to $120 after that.
So, you put a buy stop limit. The basic method would be a buy stop - in that case, let's say you put that price as $101 since you've determined that if it gets to $101, it's a solid breakthrough and the uptrend will continue. The buy stop is such that when the price hits $101, your order becomes a market order.
Buy stop limit, is the same except you are putting a specific limit to the slip. Because if it was just a buy stop, your order might close at $103. With a buy stop limit you can say "when the price hits $101, put a limit buy for $102, because although I do believe it's going to run up, I don't want to waste my money on $103 slip."
So I assume slip means that if you put in a buy stop at $101 it could actually get filled at $103?
Correct. The less liquid the stock, the bigger the spread/slip potential. The more liquid, the smaller it should be.