Stop Order

A stop order is a type of order to buy or sell a security once its price reaches a specified level, known as the stop price. Once the stop price is triggered, the stop order becomes a market order and is executed at the next available price. Stop orders are commonly used by traders to limit potential losses (stop-loss) or to lock in profits on a winning position (stop-gain).

Example

An investor holds a stock trading at $100 and sets a stop-loss order at $90. If the stock price falls to $90, the stop order is triggered, and the stock is sold to limit further losses.