Stop Loss Market Order
Stop-loss market order or SL-M order for short is a specific type of stop-loss order in trading terminals provided by few brokers. For example here is the screenshot of stop loss market order from Upstox terminal.
On few terminals, it will show up simply as SL-M order.
How does the SL-M order work?
SL-M order works by using two order types – Stop-loss order and Market order. In normal stop-loss order, you put a trigger price and also a limit price. This means, you tell the broker system when to forward your order to exchange, and then you also mention a price by which you want your order to be executed.
But, sometimes the market or the security you are trading is volatile, and you don’t want your order to be missed. In that case, the SL-M order works great.
What it does is – as soon as your trigger price is reached. It will push your order as a market order into the exchange, thus increasing the chances that your order will be executed immediately.
What is the difference between a stop limit and a stop market order?
A stop-limit order will have both trigger price and limit the price of executing an order. You know beforehand what price range your order will be executed. If due to market volatility or liquidity, the order is not executed at that limit price (or better) then your order will stay in the system as a limit order.
In case of a stop market order, your order is executed as soon as the trigger price is reached. This happens because, as soon as your trigger price is reached, your order is sent to exchange as a market order and thus, it is matched to the first-order available in the market.