Stop loss order Order (exchange)

an example of stop-loss order on candlestick plot. 100 units bought , stop-loss sell order placed 2 monetary units below limit losses.

a stop order, referred stop-loss order, order buy or sell stock once price of stock reaches specified price, known stop price. when stop price reached, stop order becomes market order. buy–stop order entered @ stop price above current market price. investors use buy stop order limit loss or protect profit on stock have sold short. sell–stop order entered @ stop price below current market price. investors use sell–stop order limit loss or protect profit on stock own.

when stop price reached, , stop order becomes market order, means trade executed, not @ or near stop price, particularly when order placed fast-moving market, or if there insufficient liquidity available relative size of order.

the use of stop orders more frequent stocks , futures trade on exchange trade in over-the-counter (otc) market. exact mechanism of stop order may vary between brokers , software platforms. instance, charles schwab defines stop order follows: stop orders , stop-limit orders similar, primary difference being happens once stop price triggered. standard sell-stop order triggered when bid price equal or less stop price specified or when execution occurs @ stop price.