Loading the player...

What is a 'Stop Order'

A stop order is an order to buy or sell a security when its price surpasses a particular point, thus ensuring a greater probability of achieving a predetermined entry or exit price, limiting the investor's loss or locking in his or her profit. Once the price surpasses the predefined entry/exit point, the stop order becomes a market order.

Also referred to as a "stop" and/or "stop-loss order."

BREAKING DOWN 'Stop Order'

Investors commonly use a stop order before leaving for holidays or entering a situation where they are unable to monitor their portfolio for an extended period.

Stops are not a 100% guarantee of getting the desired entry/exit points. For instance, if a stock gaps down, the trader's stop order will be triggered (or filled) at a price significantly lower than expected.

Traders who use technical analysis will place stop orders below major moving averages, trendlines, swing highs, swing lows or other key support or resistance levels.

RELATED TERMS
  1. Bracketed Buy Order

    A buy order that is accompanied by a sell limit order above the ...
  2. Bracketed Sell Order

    A sell order on a short sale that is accompanied (or "bracketed") ...
  3. Trailing Stop

    A stop order that can be set at a defined percentage away from ...
  4. Above The Market

    An order to buy or sell at a price set higher than the current ...
  5. Hard Stop

    A price level that, if reached, will trigger an order to sell ...
  6. Stop-Limit Order

    An order placed with a broker that combines the features of stop ...
Related Articles
  1. Investing

    Understanding Buy Stop Orders

    A buy stop order is an order to buy a stock at a specific price above its current market price.
  2. Investing

    Stop Loss Order Strategy

    A stop loss order is an order placed with a broker to sell a stock immediately if it drops to a certain price. It's a common way for investors to protect themselves from the possibility of a ...
  3. Trading

    Trailing-Stop/Stop-Loss Combo Leads to Winning Trades

    Combine trailing stops with stop-loss orders to reduce risk and protect portfolio value.
  4. Trading

    A Logical Method Of Stop Placement

    If holding on to losing trades is human nature, this tool will help protect you from yourself.
  5. Trading

    Forget The Stop, You've Got Options

    Using options instead of stop-loss orders adds finesse and control in limiting losses.
  6. Investing

    Three Types Of Profit Protection Stops

    Three types of profit protection stops lock in profits at different stages in the progression of a successful trade.
  7. Trading

    The Stop-Loss Order - Make Sure You Use It

    It's a simple but powerful tool to help you implement your stock-investment strategy. Find out how.
  8. Investing

    The Truth About Investing Using Stop Losses

    Stop losses are supposed to save you money when a stock's value falls, but they end up costing more.
  9. Trading

    Which Order to Use? Stop-Loss or Stop-Limit Orders

    Stop-loss and stop-limit orders can provide different types of protection for investors seeking to lock in profits or limit losses. Investors need to know how each type of order works to know ...
RELATED FAQS
  1. What is the difference between a stop order and a stop limit order?

    Learn the differences between a stop order and a stop limit order. Traders use these as stop losses and regular investors ... Read Answer >>
  2. What is the difference between a buy limit and a stop order?

    Learn the difference between buy limit orders and stop orders, including stop loss orders, and understand the risks of the ... Read Answer >>
  3. What's the difference between a stop and a limit order?

    A limit order is an order that sets the maximum or minimum at which you are willing to buy or sell a particular stock. With ... Read Answer >>
  4. Are stop orders only used for stocks?

    Learn about sell-stop and buy-stop orders, when and how to use stop orders and what other securities stop orders could be ... Read Answer >>
  5. How do I set a strike price in foreign exchange trading?

    Learn about the different order types foreign exchange traders can use to manage positions at certain strike prices and how ... Read Answer >>
  6. What types of investors are best-suited for stop loss orders?

    Use a stop-loss order to mitigate downside risk. Whether you are a conservative beginner or a seasoned day trader, a stop ... Read Answer >>
Hot Definitions
  1. AAA

    The highest possible rating assigned to the bonds of an issuer by credit rating agencies. An issuer that is rated AAA has ...
  2. Backward Integration

    A form of vertical integration that involves the purchase of suppliers. Companies will pursue backward integration when it ...
  3. Pari-passu

    A Latin phrase meaning "equal footing" that describes situations where two or more assets, securities, creditors or obligations ...
  4. Interest Rate Swap

    An agreement between two parties (known as counterparties) where one stream of future interest payments is exchanged for ...
  5. Custodian

    A financial institution that holds customers' securities for safekeeping so as to minimize the risk of their theft or loss. ...
  6. Supply Chain

    The network created amongst different companies producing, handling and/or distributing a specific product. Specifically, ...
Trading Center