stoporders

Stop orders are conditional trades that become active only after a security’s price reaches a specified level. They are commonly used to limit potential losses, protect profits, or enter a position at a predefined price. The two main categories are stop-market orders and stop-limit orders.

A stop-market order, often called a stop order, triggers a market order when the stop price is hit. Once triggered, the order is executed at the best available price. This provides quick execution but may result in slippage if the market moves rapidly or gaps away from the stop price.

A stop-limit order triggers a limit order when the stop price is reached. The order will only fill at or better than the specified limit price, which reduces slippage but introduces the risk that the order does not get filled if the market moves beyond the limit price.

Trailing stops are a related variant that adjust the stop price as the market moves in favorable directions. A trailing stop can be defined as a fixed amount or a percentage away from the highest price reached, locking in gains while attempting to exit if the price reverses by the trailing amount.

Trailing stop-entry and stop-entry orders are used to initiate positions once the price crosses a threshold, either above or below the current price.

Stop orders can be used across equities, futures, and forex, but execution availability and specifics may vary by broker. They do not guarantee fill at the trigger price and are subject to market liquidity and gaps.