What a stop order does.
A stop order becomes active after a chosen trigger price is reached. For stocks, the SEC explains that a stop order becomes a market order at that point, so its fill can differ from the stop price. The same order labels can work differently across products and venues, whose rules define their triggers and execution.
A stop can be part of a trader’s risk plan, but it does not set a guaranteed maximum loss. A fast move, price gap or venue-specific trigger rule can change the result. Its role depends on the plan in which it appears.
Stop versus stop-limit.
A stop order turns into a market order once the trigger is reached. That prioritises execution, but the fill price can be worse than the trigger during a fast move. A stop-limit order turns into a limit order instead. It adds a price boundary, but it can remain unfilled if the market moves past that price.
Neither order type removes market risk. Available order types and trigger rules vary by venue, and a fast market can affect the final fill.
A fixed stop and personal risk.
The forum question asked whether I had a hard stop in mind. I described a discretionary approach based on my wider portfolio. The answer gave no stop price, percentage or method for another account.
Account size, product rules and available margin differ. Those details are why the answer did not set one stop price, percentage or method for every account.
A related answer describes what I said about entries after a pump.
Common questions.
- Does a stop-loss guarantee my exit price?
- No. For stocks, a stop order becomes a market order when triggered, and the execution price can differ from the stop price. Order rules vary by product and venue.
- What is the difference between a stop and a stop-limit order?
- For stocks, a stop order becomes a market order after its trigger is reached. A stop-limit order becomes a limit order, which sets a price boundary but may remain unfilled. Rules vary by product and venue.
- Should a new trader use a fixed stop?
- The forum exchange did not set a requirement. I described a discretionary, portfolio-level approach and gave no stop price, percentage or universal method for another account.