Definition
A stop-loss order is a conditional instruction that activates when a specified trigger price is reached, usually to reduce or close a position.
The trigger price is not the fill price
A stop-market order becomes a market order after the trigger is reached. It prioritizes execution, so the fill can differ from the trigger during fast moves or thin liquidity. A stop-limit order activates a limit order instead, preserving a price boundary but creating a risk that the order does not fill.
Venues can use different reference prices to trigger the order, such as a mark price, last trade or quote. The supported order types and trigger rules must be checked for the specific venue.
A stop-loss is one control, not complete protection
A stop can reduce exposure after a condition is met, but it cannot guarantee the maximum loss. Gaps, slippage, rejected orders, unavailable liquidity and venue failures can all change the result.
What it does not mean
A stop-loss is an execution instruction. It is not a liquidation threshold, an account-wide loss limit or a guarantee that the position closes at the trigger price.
Where this term fits
Questions about stop-loss order
- Does a stop-loss guarantee the trigger price?
- No. The trigger activates an order. The final fill depends on the order type, liquidity and market conditions.
- What is the difference between stop-market and stop-limit?
- Stop-market prioritizes execution after the trigger. Stop-limit enforces a price boundary but may remain unfilled.
- Is a stop-loss the same as a liquidation price?
- No. A stop-loss is a user instruction. Liquidation is a venue risk action when margin requirements are no longer met.
See these concepts in context
Review the Fensory MCP connection, tools and account controls.