Trading the US market
Stop order
Definition
A stop order waits until price trades at a level you set, then becomes a market order. Traders use a sell stop below the price to cap the loss on a long position, and a buy stop above it to enter a breakout. Because it fills as a market order, a fast move or a gap can fill it past your stop price.
Example
Say you buy 100 shares at $60 and place a sell stop at $57, planning to risk about $300. If the stock trades at $57 during the session, the stop becomes a market order and fills near $57. If bad news makes it open at $54 instead, the order fills around $54 and the loss is about $600, twice what you planned.
Hypothetical numbers, for illustration only.
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