A stop limit order is a two-stage conditional order. It stays dormant until the market reaches your stop price - then it wakes up and places a limit order at your chosen price. You get the trigger of a stop order and the price control of a limit order, combined.
Example:
You own TSLA, currently trading at $200. You set a sell with stop price $190 (Trigger level) and Limit price $185 (Min you'll accept)
- TSLA trades above $190 - your order sits dormant, your position is untouched
- A trade prints at $190 or below - the stop price is elected and your order converts to a limit sell at $185
- The limit order fills at $185 or higher - or stays open if the market gaps below $185 before a buyer is found
If the price reverses
If TSLA dips to $190, triggers your order, then bounces back to $200 - your sell limit at $185 is now live while the stock has recovered. Since a sell limit fills at $185 or higher, it may fill at the recovered price. If you want to keep the position, cancel the order immediately after the reversal.