Glossary / Risk
Stop-loss order
Also called: stop order · stop
A stop-loss is a resting instruction to a broker that becomes active when price reaches a specified trigger level. It is an order type, not a guarantee of an exit price.
How it is measured
How is stop-loss order measured?
There are two common forms and the difference matters. A stop-market order becomes a market order once triggered, so it transacts at whatever the next available price is. A stop-limit order becomes a limit order, which will not transact below a specified price — and therefore may not transact at all if price moves through the level quickly.
Why it matters
Why does stop-loss order matter to a swing trader?
Stops are how a defined exit level is expressed mechanically instead of relying on being present and deciding in the moment. The limitation worth understanding before relying on one is that a trigger level is not an execution level: when a market reopens below a resting stop after an overnight gap, the order activates at the reopening price, not at the trigger. Neither order type removes gap exposure, and the two failure modes are opposites — one transacts at an unexpected price, the other may not transact.
Related
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Risk disclosure · Full methodology
Related terms
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General information about market vocabulary, written to be descriptive rather than prescriptive. Not investment advice — see the risk disclosure.