For example, let’s say you’re trading a volatile stock. You buy at one hundred dollars, hoping it will go up. However, it starts dropping. Without a stop loss, you might hold on, hoping it will recover. Instead, it keeps falling, and you lose even more. With a stop loss set at ninety dollars, you would exit the trade with a small loss, rather than a potentially devastating one.

Now, let’s move on to market limit orders. A market limit order is an order to buy or sell a stock at a specific price or better. It gives you control over the price at which your trade is executed.

For example, if you want to buy a stock but only if it drops to ninety-five dollars, you set a market limit order at ninety-five dollars. If the stock reaches that price, your order will execute. If it doesn’t, your order remains pending.

The advantage here is clear. You avoid buying at a higher price than you are willing to pay. This strategy is useful in a fluctuating market where prices can change rapidly. By setting a limit, you ensure that you enter or exit a trade at a price that meets your criteria.

Let's illustrate this with an example. Suppose a stock is trading at one hundred dollars, and you believe it will go down to ninety-five dollars before rising again. You set a buy limit order at ninety-five dollars. If the stock dips to that price, your order executes, and you buy at ninety-five dollars. If it doesn’t, your order remains open, and you don’t overpay.

Next, we have Stop limit orders. A stop limit order combines the features of stop orders and limit orders. It sets two price points: a stop price and a limit price. When the stock reaches the stop price, the order becomes a limit order to buy or sell at the limit price or better.