Stop order

### What it really is A stop order is a conditional instruction, not a resting price you get filled at. Nothing happens while the market is away from your stop price. The moment price reaches it, the order wakes up and goes to market. The SEC's investor bulletin on stop orders puts it plainly: a stop order becomes a market order once the stop price is reached, and the stop price is *not* the guaranteed execution price. That single sentence contains the whole trade off. You get certainty of **action**. You get no certainty of **price**. ### Which side it sits on This is where the confusion with limit orders lives, and it is worth burning in. - A **buy stop** sits *above* current price. It fills when the market rises into it, which is why it catches breakouts. The SEC also lists it as the tool for capping a loss on a short position. - A **sell stop** sits *below* current price. It fills when the market falls into it, which is why it catches breakdowns, and why it is the standard protective stop on a long. - A **buy limit** sits *below* price and a **sell limit** sits *above* it. The exact opposite side. Buy stop above. Buy limit below. Same verb, opposite side of the market, opposite intent. Stops chase momentum, limits wait for pullbacks. Cross the two in a hurry and you will send an order you never meant to send. ### Where the money leaks Because a triggered stop executes as a market order, your fill is whatever the book offers in that instant, not what you typed. Topstep's futures education makes the same point about stop market orders: the fill is certain, the price is not. And slippage is worst in exactly the conditions that trigger stops in the first place, which Topstep lists as economic releases, thin liquidity, the open and the close, and gaps when news breaks while the market is shut. Two more mechanics worth knowing: - MetaTrader's documentation notes that a security is bought at the Ask and sold at the Bid, and that a long position's stop is checked against the Bid while a short position's stop is checked against the Ask. Your trigger is measured against one side of the spread, which is not always the price your chart is drawing. - FINRA warns that a rapid short term move can trigger your stop and price can then simply rebound to where it was. If you need price certainty more than execution certainty, the SEC describes the alternative: a **stop-limit**, which becomes a limit order at your price or better once triggered, and which may therefore never fill at all. [SEC Investor Bulletin: Stop, Stop-Limit, and Trailing Stop Orders](https://www.investor.gov/introduction-investing/general-resources/news-alerts/alerts-bulletins/investor-bulletins-15)