Definition

1. Noun:
   • A stop order is a conditional instruction given by an investor to a broker to execute a trade (to buy or sell a security) only when the market price reaches a specified level, known as the stop price. Its primary function is to limit an investor's loss or to protect a profit on an existing position.

Usage

• A stop order becomes a market order to sell only after a specified "stop price" has been reached or passed.
• Investors place a stop order to automatically sell a stock if its price drops to a certain point, thereby capping their potential loss.
• A stop order to buy might be used to enter a position if the price rises above a resistance level, confirming an upward trend.

Examples

• "She placed a stop order at $45 to limit her potential loss on the shares she bought at $50."
• "The trader used a stop order to protect his profits, setting it just below the stock's recent high."
• "Once the market price fell to $30, the stop order was triggered and the shares were sold."

Advanced Usage

• Stop-Loss Order: This is the most common type of stop order, specifically designed to sell an asset to prevent further loss.
  • His stop-loss order at $90 was executed when the market dipped, saving him from a larger decline.
• Buy Stop Order: An order to buy a security once its price rises to a specified stop level, often used to enter a breakout.
  • He entered a buy stop order at $52, anticipating a breakout above resistance.

Variants and Related Words

• Stop-Loss Order (n): A specific type of stop order to sell, aimed at limiting loss.
• Stop Price (n): The specified price level that triggers a stop order.
• Market Order (n): An order to buy or sell immediately at the best available current price, contrasting with the conditional nature of a stop order.
• Limit Order (n): An order to buy or sell at a specific price or better, differing from a stop order which becomes a market order after the stop price is hit.

Synonyms

• Stop-Loss Order
• Conditional Order

Related Phrases

• Trigger a stop order: To activate or execute a stop order when the market price reaches the stop price.
  • The sudden news caused a sell-off, triggering many stop orders in the market.
• Place/Set a stop order: To instruct a broker to establish a stop order.
  • It is prudent to place a stop order when entering a volatile trade.

Noun

1. an order to a broker to sell (buy) when the price of a security falls (rises) to a designated level