Glossary · Defined term
Stop-loss order
A stop-loss order becomes a market order to sell once a stock falls to a set trigger price, automating loss control.
Last updated Oct 2, 2026
What it means
A stop-loss order is an instruction to sell a stock once it falls to a specified trigger price, at which point the order becomes a market order. It automates loss control: the investor decides in advance the maximum pain they will tolerate, and the broker executes without further input. The catch is that the trigger guarantees a sale, not a price; in a fast decline or an overnight gap, the fill can be well below the trigger. A stop-limit order adds a price floor but risks not filling at all. Stop-losses are risk tools, not profit strategies, and they work best when the trigger reflects a real decision rather than market noise.
An example
For illustration, an investor buys at $80 and sets a stop-loss at $70. If the stock slides to $70 during calm trading, the order fills near $70. But if terrible news breaks overnight and the stock opens at $60, the stop triggers and sells near $60, not $70, limiting further damage without guaranteeing the trigger price.