Accountable publisher
Published under the RTX5 Editorial Team byline. It identifies the responsible publishing organization; it does not imply that a named lawyer, regulator, financial adviser, or licensed expert approved this page.
Trading glossary
What Is a Stop-Loss Order? Stop Loss Meaning and Limits
A stop loss order, also called a stop-loss order, is an order to buy or sell a stock, currency pair or other instrument once its price reaches a stop price. When that price is reached, the order becomes a market order. A stop loss can limit a loss, but it does not guarantee the exit price.
In brief
What is a stop loss order?
A stop loss is a trigger, not a price guarantee. Here is how it works for long and short positions, where the fill can land away from the stop, and how it links to position size.
Key takeaways
- A stop loss order becomes a market order once the stop price is reached, so the fill price can differ from the stop price.
- On a long position the stop sits below the market. On a short position it sits above the market.
- A stop-limit order caps the fill price but may not fill at all. A trailing stop moves with favourable price changes where the broker offers it.
- Stop distance and position size work together. A wider stop needs a smaller position for the same amount at risk.
- A stop loss does not guarantee your exit price, especially around gaps and in fast markets.
How a stop loss order works
A stop loss order is an order to buy or sell a stock once its price reaches a specified level, known as the stop price. When that price is reached, the stop order becomes a market order. The SEC's investor education site describes stop orders in this way for stocks. For the wider background, read what is trading.
The stop loss is an instruction about timing, not a promise about price. It tells the broker when to act. It does not tell the broker which price to accept. The order can help control a loss, but only as far as the market allows once the trigger is reached. Stop orders on forex and CFD accounts follow the rules of the broker, so check them before you rely on one.
Where a stop loss goes for a long and a short position
- Long position (you own the asset): a sell stop loss sits below the current market price. Investors generally use a sell stop order to limit a loss on a stock they own.
- Short position (you sold first): a buy stop loss sits above the current market price. Investors generally use a buy stop order to limit a loss on a stock they have sold short.
In both cases the stop closes the position: a long is closed by a sell and a short by a buy. Confirm the side and the stop price on the order ticket before you submit it.
Stop loss worked example: EUR/USD
This is an illustrative example, not a recommendation. You buy EUR/USD at 1.0850 and place a sell stop loss at 1.0825. That is 25 pips below your entry. A pip is 0.0001 for EUR/USD, so the distance is 0.0025. The pip guide explains how pips are counted.
Assume a US$ account and a position of 0.20 lots. One standard lot of EUR/USD is worth US$10 per pip, so 0.20 lots is worth US$2 per pip. A 25 pip move to the stop costs 25 x US$2 = US$50. That is the planned loss before spreads, commissions and any slippage. If your account is US$5,000 and you accept 1% risk, which is US$50, the same numbers give a position of 0.20 lots.
Gaps and slippage: when the fill is not the stop price
A gap is a jump from one price to another with no trades in between. It can happen when a market reopens or after news. Use the same trade as above and suppose the market reopens at 1.0800, below the 1.0825 stop. The stop order becomes a market order at that point, and it can fill near 1.0800.
At 1.0800 the move from the 1.0850 entry is 50 pips. At US$2 per pip that is US$100, double the US$50 planned loss. This gap example is illustrative only. The SEC investor bulletin says the execution price can deviate significantly from the stop price because of the prices of the liquidity available when the market order executes.
Stop loss, stop-limit and trailing stop orders compared
A stop loss is not the only stop-type order. The SEC investor bulletin covers three. A stop-limit order adds a limit price to the stop price, and a trailing stop order moves its stop as the price moves in your favour. The table sets out what each order does according to that bulletin.
| Order | What triggers it | What happens once triggered | Main trade-off |
|---|---|---|---|
| Stop loss (stop order) | The market reaches the stop price | Becomes a market order and fills at the prevailing price | The fill can differ significantly from the stop price |
| Stop-limit order | The market reaches the stop price | Becomes a limit order that fills only at the limit price or better | May not fill at all if the price moves away from the limit |
| Trailing stop order | The price reaches a stop set a defined percentage or dollar amount from the market price | The stop price adjusts as the price moves in a favourable direction, then acts as a stop or stop-limit order | Not offered by every broker; the platform and broker set availability |
Source: SEC investor bulletin 'Stop, Stop-Limit, and Trailing Stop Orders'. The bulletin notes these orders may not be available through all brokerage firms.
For the limit side of the comparison, see what is a limit order. The order that closes a trade at your target is a take-profit order, and the risk-reward ratio compares the distance to each.
Where to place a stop loss
The position of a stop loss is a judgement about your trade idea and the loss you can accept. Two common approaches are a technical level, such as a price where your analysis says the trade idea is no longer valid, and a fixed amount, such as the most you will lose in your account currency. This guide does not recommend either approach.
The SEC bulletin warns that a stop order may be triggered by a short-term, intraday price move that fills substantially worse than the day's closing price. Short-term traders, such as those described in day trading explained, see these moves more often. Before choosing a level, check which price your broker uses to trigger the stop.
- Ask whether your broker triggers stops on last-sale prices or on quotes. The SEC bulletin says different firms use different standards.
Linking stop distance to position size
Stop distance and position size work together. Once you know the amount you accept to lose and the distance from entry to stop, the position size follows. The arithmetic is: position size in lots equals the amount at risk, divided by the stop distance in pips multiplied by the pip value per lot.
Using the same US$5,000 account and 1% risk of US$50, a 25 pip stop with a pip value of US$10 per standard lot gives 50 / (25 x 10) = 0.20 lots. A 50 pip stop with the same risk gives 50 / (50 x 10) = 0.10 lots. The wider stop needs the smaller position. These are illustrative figures, not a suggested trade.
Use the position size calculator to run the same arithmetic for your own account currency and pair. The position sizing in forex article explains the method in more detail.
Server-side and platform-side stop losses
A stop loss can be held in different places. Some stops are recorded with the broker's trading system, so the broker monitors and triggers them. Others are held by trading software on your own device, so they depend on that software running and staying connected when the price moves. Terminology and behaviour differ between brokers, so ask yours how its stops are stored and triggered.
The difference matters when your device, connection or software is offline. Check with your broker where its stops are held and which price triggers them. RTX5 is not a broker and does not hold client money.
Risk disclosure
- A stop loss does not guarantee your exit price. Once the stop price is reached, a stop order becomes a market order, and the fill can differ significantly from the stop price.
- Gaps at a market reopening or after news can fill the order far beyond the planned loss, as in the EUR/USD example above. On leveraged positions the larger loss also affects your margin; see margin in trading.
- A short-term or intraday price move can trigger a stop and fill it at a price much worse than the day's closing price.
- A stop-limit order may not fill at all if the price moves away from the limit, so a losing position can stay open.
- Stop and trailing stop availability, and the price your broker uses to trigger stops, depend on the broker and platform. Check them before you trade.
- This page is educational and is not personal financial advice. Trading can lose money quickly, and the examples are illustrative only.
RTX5 status
RTX5 is Orrnn's trading terminal and broker-technology product. Its Windows desktop client is in preview, and the web and mobile clients are planned. A Google Play listing for Android is published, but the mobile client has no approved release record yet; check the product-availability record and release notes before relying on any RTX5 feature. The stop-loss examples on this page are illustrative and do not come from an RTX5 feature.
Check RTX5 product availabilityTrust and methodology
How this research was prepared
We want you to be able to identify who owns the page, inspect the evidence, understand how tools were used, and challenge anything that looks wrong or out of date.
Evidence you can inspect
4 primary references are listed on this page with context about what each one supports. The source set was checked on .
Assistance is disclosed
Automation and AI may help organize research, outline a page, or edit language. They are not treated as sources, are not presented as human experts, and do not remove the publisher's responsibility for the final page.
Corrections are welcome
If a statement is incomplete, unsupported, or outdated, send the exact URL, sentence, and supporting evidence through our contact route. Read the full editorial and corrections policy.
Primary references
Sources were checked on 9 November 2026. They explain market rules and concepts; they do not certify RTX5 or provide individual financial advice.
Investor.gov: Types of OrdersDefines a stop order, also called a stop-loss order, as an order that becomes a market order once the stop price is reached. Says a buy stop sits above the current price and a sell stop below it. Checked 7 November 2026.Investor.gov: Stop, Stop-Limit, and Trailing Stop Orders bulletinSays the stop price is not the guaranteed execution price, that the fill can deviate significantly from it, and that stop-limit orders may not execute. Defines trailing stops by a percentage or dollar amount and notes that these orders may not be available through all brokerage firms. Bulletin dated 13 July 2017, updated 18 August 2026.Investor.gov glossary: Stop OrderSays the price at which a stop order is executed may differ from the stop price, especially in a fast-moving market. Checked 7 November 2026.RTX5 product availabilityRTX5 status record. Use it to check which RTX5 products and clients are live before relying on any feature.
Questions readers ask
Does a stop loss guarantee my exit price?
No. A stop loss sets a trigger, the stop price. When the trigger is reached, a stop order becomes a market order, and the execution price can differ from the stop price, especially in a fast market or after a gap. The SEC investor bulletin says the stop price is not the guaranteed execution price. A stop loss can still limit a loss, but it does not fix the exit price.
What is the difference between a stop loss and a stop-limit order?
A stop loss becomes a market order once triggered, so it executes at the prevailing market price, which can differ from the stop price. A stop-limit order becomes a limit order at the limit price or better, so it controls the fill price but may not fill at all if the market moves away from the limit. The stop and limit prices do not have to be the same. Availability depends on your broker.
Where should I place a stop loss?
This guide does not recommend a level. Some traders place a stop at a technical level where their trade idea would no longer be valid. Others start from a fixed amount they are willing to lose and size the position to match. Either way, consider short-term price moves, check which price your broker uses to trigger the stop, and confirm the pip value before you size the trade.
Do all brokers offer trailing stop orders?
No, not necessarily. The SEC investor bulletin says stop, stop-limit and trailing stop orders may not be available through all brokerage firms, and firms can have different policies. Ask your broker which order types it offers, whether trailing stops work on your platform, and whether it triggers stops on last-sale prices or on quotes.
Can a stop loss protect me over a weekend or overnight?
It can be triggered when the market reopens beyond the stop, but it cannot promise a fill at the stop price. A market that reopens at a new level can fill far from the stop, so the planned loss can become a larger one. Check your broker's trading hours and how its stops behave when your platform is offline.
Keep learning
What is a limit order?How a limit order sets a maximum buy or minimum sell price, and why it may never fill.What is margin in trading?How margin and leverage change the size of a loss on a leveraged position.Day trading explainedHow short-term trading works, and why intraday moves matter for stop placement.Position size calculatorWork out a position size from the amount at risk and the distance to your stop.What is trading?The basics of trading instruments, orders and risk.Average true range (ATR)How true range is measured, and a worked example of an ATR-based stop distance.