Stop Order
Order Types
What it means
An order that sits inactive until a trigger price is hit, then becomes a market order. It is most often used to cap losses.
Example
You buy at $100 and place a sell stop at $95. If price drops to $95, the stop fires and sells at market -- your fill might be $94.90 in a fast market.
Mistake beginners make
Beginners expect a stop order to fill exactly at the stop price. Once triggered, it is a market order, so in fast markets the fill can be much worse.
Related terms
- Limit Order — An order to buy or sell only at a specific price or better. It guarantees the price but no…
- Stop-Limit Order — A stop order that, when triggered, becomes a limit order instead of a market order. It cap…
- Stop-Loss — A pending order to close your position at a loss once price hits a set level. It caps how …