Stop order

A stop order is an order to buy or sell an asset once the price of the stock reaches a specified price, known as the stop price.

When the stop price is reached, a stop order becomes a market order. Traders use this type of order for two main strategies: As a risk-management tool to limit losses on existing positions, and as an automatic tool to enter the market at a desired entry point without manually waiting for the market to place the order.

A buy stop order is always placed above the market, and a sell stop order is placed below the market.