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Investments glossary

Stop-Loss Order


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— Johnny Depp, Pirates of the Caribbean

A stop-loss order is an order placed with a broker to buy or sell a security when it reaches a certain price. Stop-loss orders are designed to limit an investor’s loss on a position in a security and are different from stop-limit orders. When a stock falls below the stop price the order becomes a market order and it executes at the next available price. For example, a trader may buy a stock and places a stop-loss order 10% below the purchase price. Should the stock drop, the stop-loss order would be activated, and the stock would be sold as a market order.

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