All terms
An order that sells automatically if the price falls to a level you set.
A stop loss is a pre committed exit. You decide, while calm, the price at which your idea is wrong, and the order executes there without you having to make the decision in the moment.
The mechanics matter. A stop becomes a market order when triggered, so in a fast fall it can fill well below your level. In thin markets that gap can be enormous, and stops clustered at obvious round numbers are a known target.
Most decentralized exchanges do not support stop orders natively, because there is no order book to hold them. On those venues the equivalent is deciding your exit in advance and executing it manually.
Setting a stop twenty percent below entry, and understanding that in a violent drop the actual fill may be considerably worse.
That a stop guarantees your exit price. It becomes a market order when triggered, so in a fast fall it fills wherever there are buyers, which can be far below your level. It caps the decision, not the loss.
Common questions
Where should I put a stop loss?
Can a stop loss be triggered unfairly?
Where this comes up on the site
The guides that actually use this word, rather than a list of everything we have written.
Where to go next
More trading terms
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