Stop-Loss Order
A stop order placed to exit a position at a loss before it grows larger. The primary tool for managing downside risk.
A stop-loss order is a stop order whose sole purpose is damage control. It sits below a long position (or above a short) and triggers if the trade moves against you past an acceptable threshold.
Once triggered it becomes a market order, so the fill may be worse than the stop price during gaps or high-volatility events. This is known as gap risk.
Placing a stop-loss before entering a trade enforces pre-defined risk — a cornerstone of professional position sizing. Rule of thumb: the stop should be at a logical price level (support, swing low) rather than an arbitrary dollar amount.
Example
You buy XYZ at $50.00 with a stop-loss at $48.00. Maximum risk is $2.00 per share. If XYZ falls to $48.00 the position is closed automatically.
Related Terms
Bracket Order
A single entry order packaged with a take-profit and a stop-loss; when one exit fires, the other is automatically canceled.
BeginnerGood 'Til Canceled (GTC)
An order that stays active until it fills or you manually cancel it — it does not expire at day end.
BeginnerOne Cancels the Other (OCO)
A pair of orders where filling one automatically cancels the other — used to set simultaneous upside and downside exits.
BeginnerOrder Types
The instructions that tell a broker how to execute a trade — chiefly market, limit, and stop orders, plus their conditions and time-in-force.
BeginnerSell Stop
A stop order placed below the current price that triggers a market sell when price falls to the stop level — the standard stop-loss mechanism for long positions.
BeginnerSlippage
The difference between the expected fill price and the actual fill price. Positive slippage benefits you; negative slippage costs you.
BeginnerStop Order
An order that becomes a market order once the asset trades at or through a specified stop price.
BeginnerStop-Limit Order
A two-stage order: a stop price triggers the order, then a limit price caps the worst acceptable fill.
IntermediateTake-Profit Order
A limit order placed above a long entry (or below a short) to automatically lock in gains when a target price is reached.
BeginnerTrailing Stop
A stop-loss that automatically moves in your favor as price advances, locking in profit while capping downside.
Intermediate