DEFINITION of 'Stopped Out'

The execution of a stop-loss order. Stopped out refers to when an investor predetermines a price at which they want to sell if the stock's price falls, they place a stop-loss order. If they purchase a stock for $35 a share and doesn't want to continue holding the stock if it falls to $30 a share, they would place a stop-loss order for $30. If the stock did in fact fall to $30 a share, the investor's stop-loss order would be executed and the investor would be stopped out.

BREAKING DOWN 'Stopped Out'

While stop-loss orders are an effective strategy for limiting potential losses, they will sometimes be executed because market conditions are volatile or because the stock itself is volatile and not because the stock has experienced a lasting drop in price. The aforementioned $35 stock might fluctuate throughout the day and drop as low as $27 only to close back up at $36. The investor who placed a stop-loss order at $30 would no longer own the stock at the end of the day because they would have been stopped out, but this result could be undesirable since the stock ended up rising again rather than continuing to fall.

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