Stop Order
A stop order stays inactive until the price reaches a trigger level and then becomes a market order — used to limit losses or to enter when price breaks a level.
A stop order waits. Nothing happens until the price touches your trigger; then it turns into a market order and fills at the next available price. That makes it the standard tool for stop-losses, and also a way to enter a trade only once price breaks through a level. This entry explains buy and sell stops, how they differ from limit and stop-limit orders, and what happens in fast markets.
- Category
- Order Types
- Reading time
- 4 min
- Also called
- Stop-market order, Buy stop, Sell stop
- Updated
A stop order in plain words
A sell stop sits below the current price: “if it falls to $45, sell”. A buy stop sits above it: “if it rises to $55, buy”. See Stop Loss.
Once triggered, it becomes a market order.1 It will fill, but not necessarily at the trigger price. See Market Order and Slippage.
How to use a stop order, step by step
Choose the purpose
Exit (protective stop) or entry (breakout stop).
Pick the trigger level
Beyond a level that would prove the trade wrong, or beyond a breakout point. See Support and Resistance.
Allow for noise
Place it outside normal swings, for example using ATR. See Average True Range.
Size the position
The distance to the stop sets your risk. See Position Sizing.
Set time in force
Day or good-till-cancelled. See Time-in-Force: IOC, FOK and GTC.
Plan for gaps
Know that the fill can be beyond the trigger.
Worked examples
Example 1 — Protective sell stop
ExitLong at $60, sell stop at $57. The price falls through $57; next trade at $56.95.
| Trigger | $57.00 |
| Fill | $56.95 |
| Slippage | $0.05 |
A stop guarantees an exit in normal conditions, not an exact price.
Example 2 — Buy stop for a breakout
EntryResistance at $100. A buy stop at $100.20 triggers when price breaks out.
| Entry | ≈ $100.20 after the break |
Buy stops enter only when the market proves strength. See Breakout.
Example 3 — The overnight gap
GapSell stop at $45. After bad news, the stock opens at $39.
| Trigger | $45 |
| Fill | ≈ $39 |
In a gap, stops fill at the first available price. See Price Gap.
Stop, limit and stop-limit orders
| Aspect | Placed (for a sell) | When it fills | Main risk |
|---|---|---|---|
| Sell stop | Below price | At market once triggered | Slippage, gaps |
| Sell limit | Above price | At the limit or better | May not fill |
| Sell stop-limit | Below price | Only within the limit after trigger | May not fill at all |
| Trailing stop | Follows price | At market once triggered | Same as stop. See Trailing Stop |
When stop orders are used
Stop-losses
Automatic exits that cap losses.
Breakout entries
Entering only after a level breaks.
Protecting shorts
Buy stops above the price limit short losses. See Short Selling.
Locking in profit
Raising stops as a trade moves in your favour.
Advantages and disadvantages
Advantages
- Executes your exit plan automatically.
- Almost always fills once triggered in normal markets.
- Lets you enter only on confirmation.
Disadvantages
- Fills can be worse than the trigger.
- Gaps can cause large slippage.
- Obvious stop levels can be hit by brief spikes.
- Not all markets or brokers support every stop type.
Going deeper
Read as far as you need. Each level builds on the one before it.
Buy stop vs. buy limit
Beginner
A buy stop is placed above the price (buy if it rises); a buy limit is placed below it (buy if it falls).2 Confusing them is a common error.
Trigger price source
Intermediate
Brokers may trigger stops on the last trade, the bid or the ask. In wide-spread markets this changes when a stop fires.
Stop clusters
Advanced
Many stops just beyond obvious levels can accelerate a move once triggered, briefly pushing price further before it settles. See Liquidity.
Common mistakes
Stops too tight
Normal noise triggers them.
Confusing stop and limit
Check which side of the price each goes.
Assuming an exact fill
Expect some slippage.
Moving stops further away
That increases risk beyond the plan.
Check your understanding
Test yourself before moving on. Each answer comes with an explanation.
Key points to remember
- A stop order becomes a market order once its trigger is reached.
- Sell stops go below the price; buy stops above.
- It nearly always fills, but not at an exact price.
- Gaps can cause fills far beyond the trigger.
- Stop-limit orders trade fill certainty for price control.
Frequently asked questions
Is a stop order guaranteed to fill at my price?
What is the difference between a stop and a stop-limit?
Can I use stop orders to enter trades?
Further learning
- Stop Loss
The most common use of stop orders.
- Stop-Limit Order
The variant with a price limit.
- Order
An overview of all order types.
- Price Gap
When stops fill far from the trigger.
Sources
This article is written in our own words. The sources below support the specific facts, rules and figures marked with a number in the text. Links open the original publisher’s page.
- Investor.gov (SEC). Stop, Stop-Limit, and Trailing Stop Orders – Investor Bulletin (opens in a new tab) Checked .
- Investor.gov (SEC). Understanding Order Types – Investor Bulletin (opens in a new tab) Checked .
Educational content, not financial advice. Examples use hypothetical prices and simplified costs; actual fees, margin rules and regulations vary by broker, market and country. We are not affiliated with any publisher linked above. Last reviewed . Report an error or request a source credit.