Stop Order
An order that becomes a market order once the asset trades at or through a specified stop price.
A stop order (also called a stop-market order) is inactive until the market touches your stop price. At that point it converts into a market order and fills at the next available price.
Because it triggers as a market order, execution is guaranteed once the stop is reached, but the fill price may differ from the stop price — especially in fast or illiquid markets.
Stop orders are used both to limit losses (stop-loss below a long position) and to enter breakouts (buy stop above current price).
Example
You own XYZ at $50.00 and place a stop order at $47.00. If XYZ prints $47.00, the order triggers and you sell at the next market price — say $46.90 in a fast market.
Related Terms
Buy Stop
A stop order placed above the current price that triggers a market buy when price rises to the stop level — used to enter breakouts.
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-Limit Order
A two-stage order: a stop price triggers the order, then a limit price caps the worst acceptable fill.
IntermediateStop-Loss Order
A stop order placed to exit a position at a loss before it grows larger. The primary tool for managing downside risk.
BeginnerTrailing Stop
A stop-loss that automatically moves in your favor as price advances, locking in profit while capping downside.
Intermediate