What is the difference between stops and limits?

<p id="isPasted">In the context of trading, limit orders guarantee a specific price or better, but execution is not guaranteed, while stop orders guarantee execution once a specific price is reached, but the execution price may be different from the trigger price.&nbsp;</p><p>Limit Orders:</p><p>Definition:</p><p>A limit order is an instruction to buy or sell an asset at a specific price or better.&nbsp;</p><p>Execution:</p><p>The order is only filled if the market price reaches or improves upon the limit price.&nbsp;</p><p>Guarantee:</p><p>Guarantees the execution price (or better), but not the execution itself.&nbsp;</p><p>Use Case:</p><p>Used when you want to control the entry or exit price, especially in stable markets.&nbsp;</p><p>Example:</p><p>If you set a buy limit order at $50, the order will only be filled if the price is $50 or lower.&nbsp;</p><p>Stop Orders:</p><p>Definition:</p><p>A stop order is an instruction to buy or sell an asset when the market price reaches a specific "stop price".&nbsp;</p><p>Execution:</p><p>Once the stop price is reached, the order becomes a market order (or a limit order in the case of a stop-limit order) and is filled at the best available market price.&nbsp;</p><p>Guarantee:</p><p>Guarantees execution once the stop price is reached, but the price at which it executes may be different from the stop price.&nbsp;</p><p>Use Case:</p><p>Used to limit losses (stop-loss orders) or to potentially enter a trade when a price level is broken.&nbsp;</p><p>Example:</p><p>If you set a sell stop order at $50, the order will be triggered if the price falls to $50 or lower. The order will then be filled at the best available market price, which may be lower than $50.&nbsp;</p>

<p id="isPasted">A limit order is used to buy or sell at a specified price or better to lock in a desired entry or exit, while a stop order is an instruction to trigger a market order once a certain price is met, often to limit losses when the market moves unfavorably. The main difference is that a limit order provides a guaranteed price but risks not being filled, whereas a stop order guarantees execution but not at a specific price, which could lead to worse fills.&nbsp;</p><p>Limit Orders</p><p>Purpose: To buy at or below a set price, or sell at or above a set price.&nbsp;</p><p>Execution: Only fills if the market reaches your specified limit price or a more favorable price.&nbsp;</p><p>Guaranteed Price: Yes, you get your desired price or better.&nbsp;</p><p>Risk: No guarantee of execution if the market never reaches your price.&nbsp;</p><p>Use Case: To enter a trade at a specific advantageous price or to ensure you get a favorable exit price.&nbsp;</p><p>Stop Orders</p><p>Purpose: To trigger a market order once a certain price is breached, typically to protect against losses or to enter a trade.&nbsp;</p><p>Execution: Once the stop price is hit, the order becomes a market order and executes at the next available price.&nbsp;</p><p>Guaranteed Price: No, you may end up trading at a price worse than your stop price.&nbsp;</p><p>Risk: You might be filled at an unfavorable price if the market moves quickly.&nbsp;</p><p>Use Case: To limit potential losses (a "stop-loss" order) or to buy when a stock price breaks above a certain resistance level.&nbsp;</p>