A stop order (also stop loss order) is an order to sell (or buy) a security once the price of the security has climbed above (or dropped below) a specified stop price. (Note that both bid and ask prices can trigger a stop order.) When the specified stop price is reached, the stop order is entered as a market order (no limit). This means the trade will definitely be executed, but not necessarily at or near the stop price, particularly when the order is placed into a fast-moving market, or if there is insufficient liquidity available relative to the size of the order.
A buy-stop order is placed at a price above the market and is usually intended to limit losses on short positions, and a sell-stop order is placed at a price below the market and is usually intended to limit losses on long positions.
