Stop-Loss Order
A stop-loss closes a position at a set price to cap losses. It becomes a market order once triggered.
A stop-loss closes a position at a set price to cap losses. Once triggered it becomes a market order, so fast markets can slip past your level.
A stop-loss order is an instruction to close a position when price reaches a specified level, designed to cap the loss on a trade. Once price touches the stop level, it converts into a market order, so the actual exit can be worse than the stop price in fast markets (slippage). Stop-losses are the core risk-management tool in retail trading, and EU and UK rules require brokers to provide them on retail accounts.
How It Works
- Converts to a market order when price trades through the stop level
- Exit price can differ from the stop level during gaps and volatility
- Required on retail accounts under EU and UK rules
Trading Tips
Place stops where the market structure says invalidation is, not at a round number
Wide stops with small size beat tight stops with big size - position sizing is the real risk control
A stop that gets hit and then price reverses is a bad stop placement, not bad luck
Stop-Loss Order Example
Say you buy EUR/USD at 1.0850 with a stop at 1.0820. That is 30 pips of risk. On a mini lot at about $1 per pip, the most that trade should cost you is around $30 if the stop fills cleanly.
How Traders Use Stop-Loss Order
Put the stop where your idea dies, under support or beyond the swing, not at a round number that feels safe. Then size the position from the stop distance: wider stop, smaller size, same dollar risk. And never move a stop further away because you hope.
Related Terms
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