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What is a stop-loss order?
A stop-loss order is an instruction to sell, or buy back, automatically once the price reaches a level you set, called the stop price. When that price is hit, the order becomes a market order, aiming to cap a loss on a position you hold.
What it means for you
A stop price is a trigger, not a guaranteed price. In a fast or thin market your sale can fill well below the stop, and a brief dip can trigger the sale before the price recovers. Once executed, the trade cannot be undone. Platforms differ on whether the last trade or the quotes trigger it.
A common mistake: “A stop-loss guarantees I sell at my stop price.”
In fact: The stop price only triggers a market order. In a fast-moving market the fill can be markedly worse than the stop, as both the SEC and FINRA warn.
How it works
A sell stop sits below the current price and protects a position you own; a buy stop sits above it and protects a short position. Once triggered, it executes like any market order, at the prices of the liquidity available at that moment, which can deviate significantly from the stop price. A short-lived intraday move can trigger it at a price much worse than the day's close. Adding a limit price turns it into a stop-limit order, which controls the price but may never fill.
An example
Say you hold a coin bought at $100 and set a stop at $90. The price falls through $90 in a sudden drop, the order becomes a market order, and it fills at $86 because that is where the buyers were. An hour later the price is back at $95.
Sources: SEC Investor Bulletin: Stop, Stop-Limit, and Trailing Stop Orders, FINRA: Stop Orders: Factors to Consider During Volatile Markets · checked 4 October 2026
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Educational content, not financial advice. Written by hand and checked against the source named above. Something wrong? Tell us and we reply within two business days.