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Stop order

An order that becomes a market order once price trades through a trigger level.

Market, limit and stop ordersA price track crossing a resting limit order below the market and a stop order above it.10410210098PriceTime (the market moves left to right)priceSTOP BUY at 103.00waits above the market; becomes a market order when touchedtriggers hereMARKET ORDERfills at once at 100.60filled hereLIMIT BUY at 98.50rests below; fills only at 98.50 or better
Market, limit and stop orders. A market order buys straight away at whatever price is there. A limit order waits below until the price comes to it, and a stop order sits above and turns into a market order the moment price touches it.

A stop order sits dormant until the stop price is hit, then it converts into a market-order. Sell stops below the market are the usual stop-loss; buy stops above the market are used to enter on a breakout or to cover a short.

Because it becomes a market order, a stop guarantees an exit but not a price. See stop-limit-order for the alternative.

Example: you are long at $52 with a sell stop at $50. Price trades at $50 and the order fires; it fills at $49.95 in a normal market or well below in a gap.

Related: stop-loss, stop-limit-order, market-order, trailing-stop, slippage

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