Stop & Stop-Limit Orders
A stop order lies dormant until the stock trades at or through the stop price, then becomes a market order; a stop-limit order triggers the same way but becomes a limit order instead.
The classic item gives you a starting price, a stop, and either a falling or rising tape, then asks what happens when the stock touches the stop. The tell: in a gap or fast move the order can fill far from the stop — the wrong answer assumes it fills at the stop. With a stop-limit the trap flips, because the exam wants you to see it can trigger and never fill when price blows past the limit. Watch for “sell stop limit” in a crash and “buy stop limit” in a spike.
Don’t confuse a stop with a plain limit order: a buy limit sits below the market while a buy stop sits above it — opposite sides, the most-missed contrast. The buy stop is the standard hedge for the unlimited-loss short sale, where a runaway price can climb without bound. Memory hook: a stop triggers, then a limit caps — trigger first, fill second.
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