An order that becomes a market order once price reaches a specified trigger level — used to enter on a breakout.
A stop order sits dormant until price reaches its trigger level. Once triggered, it converts into a market order and fills at the next available price. Stop orders are used in two ways: as stop losses (to exit a losing trade) and as stop entries (to enter a breakout).
A buy stop is placed ABOVE the current price. Traders use it to enter long when price breaks resistance — you want to buy AFTER the breakout, not before. A sell stop is placed BELOW the current price. Traders use it to enter short when price breaks support.
The risk of stop orders is slippage. Because they convert to market orders, you can get filled significantly worse than the trigger price during fast moves or news events. For breakout trades during news, slippage can eat 30-50% of your expected profit.
Traders who set buy stops on Gold above $2,080 in February 2024 got filled cleanly on the breakout and rode the move to $2,400 — the stop entry method outperformed waiting for a pullback that never came.
Frequently asked about stop order
What is a stop order in trading?+
An order that becomes a market order once price reaches a specified trigger level — used to enter on a breakout.
When will I see stop order used in real trading?+
On every breakout strategy and every trailing stop. Stop orders are the foundation of mechanical trading.
What is the most common mistake traders make with stop order?+
Placing stop orders too close to the trigger level. A 1-pip buffer often gets hit by noise. Use a 5-10 pip buffer above the breakout level to avoid premature triggers.
What do experienced traders know about stop order that beginners don't?+
For breakout trades during news, use a stop-limit instead of a stop-market. A stop-limit caps your slippage by refusing to fill beyond a maximum price. The downside is you might miss the move, but you'll never get a terrible fill.
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