Stop order
Also known as: stop-loss order
A stop order becomes a once the trades at or through a specified trigger price, called the stop price. Until that trigger is reached, the order sits inactive and does nothing, it is not visible in the the way a resting is. Once the touches the stop price, the order activates and executes at the best available price at that moment, exactly like a plain would.
A stop order placed below the current price on an existing long position, often called a stop-loss order, is the most common use, it triggers a sale automatically if the falls to the specified level, capping further losses without the investor needing to watch the position continuously. A stop order can also be placed above the current price, for example to buy back a short position automatically if the rises to a certain level, or to buy into a only after it breaks above a level that confirms a certain kind of price move.
Because a triggered stop order becomes a rather than a , it does not guarantee a specific execution price, only that the order will trigger at the stop level. In a fast moving or gapping market, the price at which it actually fills can be meaningfully worse than the stop price itself, since by the time the order activates and searches the book for available shares, the price may have already moved further. Investors who want the trigger mechanism of a stop order but with a guaranteed price floor or ceiling on execution use a instead.