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Stop Order

In short

Becomes a market order when price hits the stop level — used as a stop-loss

A stop order is your automatic exit. Set a stop at $45 on a $50 stock — if it falls to $45, your order triggers and sells at market price. It protects you from bigger losses but can fill below $45 in a fast-moving market.

Stop orders (stop-loss orders) convert to market orders when the trigger price is hit. They protect against runaway losses but don't guarantee a specific fill price in volatile markets. In a gap-down, you may fill well below your stop price.

Related concepts

  • Stop-Limit Order — A stop-limit order sets two prices: a trigger ($45) and a limit ($44). When the stock hits $45, it tries to sell, but only at $44 or better. Safer on price, but if the stock crashes past $44, you don't get out at all.
  • Market Order — A market order says 'buy this stock right now at whatever price it's selling for.' You get filled immediately but might pay slightly more than you expected, especially for less liquid stocks.
  • Limit Order — A limit order says 'buy this stock, but only if the price drops to $50 or less.' You control the price but risk not getting filled if the stock never hits your target.
  • Slippage — You see a stock at $50 and hit buy. By the time your order fills, it's $50.08. That $0.08 is slippage — the price moved between when you decided to buy and when the order actually filled.