A stop-limit-on-quote order authorizes a trade when the stock reaches a stop price, but because you set a limit above or below that stop, it also guarantees that you will not pay more or sell for less than the limit price. Whenever the bid price (sell orders) or ask price (buy orders) reaches or surpasses the stop price, the stop-on-quote order becomes a limit order. In this situation, although you protect yourself against a rapid price change, there is still some risk that your order won't be filled if trading is extremely active.
The primary purpose of a stop-limit-on-quote order is to give the trader more control over where the order should be filled. The downside, as with all limit orders, is that the trade will not be executed if the stock does not reach the limit price. This type of orders can be placed GTC (Good til Cancelled), but they cannot be placed AON (All or None).
Stop-limit-on-quote orders are used by some investors to buy a stock when it reaches a certain price, allowing the investor to buy when the stock has upward momentum behind it.
These types of orders also may be placed with special instructions, like GTC (Good til Cancelled) and GTD (Good til Date).
- GTC - A GTC order will remain active until it is filled, cancelled by you, or no action has been taken by the last day of the month following the month of order entry. For example, a GTC order placed on March 15 will expire on April 30 at Scottrade.
- GTD - A GTD order will remain active until a specified date and a specified time chosen by you.
- Day Order - A day order will expire at the end of the trading day, if it's not executed before market close.
Any order submitted outside of market hours for regular session trading will queue until the next business day.