A stop order uses a trigger price to activate an order. A standard stop becomes a market order when the broker's trigger condition is met; a stop-limit becomes a limit order. That distinction determines whether you prioritize execution or a price boundary. Investor.gov explains the order types.

A Sell-Stop Example

Suppose you buy 100 shares at $50 and set a sell stop at $45. If triggered and filled at $45, the price loss is $500 before costs. If the stock gaps down and the order fills at $42, the loss is $800. The stop price is not a guaranteed maximum loss.

A sell stop normally sits below the current price. A buy stop normally sits above it and can close a short position or initiate a breakout entry. Opening a short still requires the account and instrument to permit it.

What Actually Triggers the Order?

Check whether your broker uses trades, bids, asks or another specified reference, and which sessions are eligible. A chart touching a level does not by itself establish that the broker's trigger condition occurred. Orders can also have different expiry rules.

FINRA's stop-order guidance describes the risks of temporary price moves and executions substantially away from the stop. A brief move can trigger an exit even if the market subsequently recovers.

Stop or Stop-Limit?

A stop-market order can execute at an unfavorable price. A stop-limit order imposes a limit price but can leave the position open if the market moves beyond it. Neither removes gap risk. Partial executions can leave a remaining position, so inspect order status rather than assuming a submitted order closed everything.

Before Using a Stop

Confirm the symbol, quantity, direction, trigger, session and duration. Know whether the order is held at the broker, exchange or local platform, and what happens if your connection fails. Test the workflow in simulation, then verify the rules of the actual account.

For an evaluation account, a stop is also not a guarantee against a rule breach: simulated fills and the provider's loss calculation can differ from your chart. Keep position sizing and account limits separate from the stop's trigger price.

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