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An order that stays inactive until the stock hits a trigger price, then activates.
Why It Matters
A stop order is an 'if-then' instruction: if the price reaches your trigger, then place a trade. Until that moment it does nothing - it just watches. That makes it useful for reacting to a price level without staring at the screen. When triggered, it turns into either a market order (a stop-loss) or a limit order (a stop-limit), which decides whether you prioritize getting filled or getting a price. Stops are commonly used to limit a loss or protect a gain, but they don't remove risk.
Key Points
- An 'if this price, then trade' instruction
- Stays dormant until the trigger is hit
- Becomes a market order (stop-loss) or limit order (stop-limit)
Learn More
Stop-Loss & Stop-Limit Orders
Get a complete explanation with examples, key takeaways, and a quiz to test your knowledge.
Related Terms
Common Questions
An order that stays inactive until the stock hits a trigger price, then activates. A stop order is an 'if-then' instruction: if the price reaches your trigger, then place a trade. Until that moment it does nothing - it just watches.
A stop order is an 'if-then' instruction: if the price reaches your trigger, then place a trade. Until that moment it does nothing - it just watches. That makes it useful for reacting to a price level without staring at the screen. When triggered, it turns into either a market order (a stop-loss) or a limit order (a stop-limit), which decides whether you prioritize getting filled or getting a price. Stops are commonly used to limit a loss or protect a gain, but they don't remove risk.
An 'if this price, then trade' instruction
Stays dormant until the trigger is hit
Becomes a market order (stop-loss) or limit order (stop-limit)