What is a stop order and how does it work?

A stop order becomes active once the market price reaches a pre-determined stop price. At that point, it converts into a market order and is filled at the best available price. If the market price does not reach the stop price, the order will not be executed. Keep in mind that a stop order does not guarantee a specific fill price, as it is executed as a market order. For a set price limit to stop losses, consider using a stop-limit order instead.

Examples

Buy Stop Order: If the current market price is $50 and you place a buy stop order at $55

• When the market price rises to $55, the buy stop order is triggered.
• It becomes a market order and will be filled at the nearest available price to $55 based on market volume.

Sell Stop Order: If the current market price is $50 and you place a sell stop order at $46

• When the market price drops to $46, the sell stop order is triggered.
• It becomes a market order and will be filled at the nearest available price to $46 based on market volume.

Disclaimer:

Due to fast-moving markets, market volatility, and illiquid markets, take profit and stop loss orders may not execute in its entirety or at all. In these instances, the stock price may skip over the set price and leave the order unexecuted or may execute at prices which are substantially different than expected.