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Stop Order

Stop Order

A stop order, also referred to as a stop-loss order, is an order to buy or sell a stock once the price of the stock reaches a specified price, known as the stop price.  When the stop price is reached, a stop order becomes a market order.  A buy stop order is entered at a stop price above the current market price.  Investors generally use a buy stop order to limit a loss or to protect a profit on a stock that they have sold short.  A sell stop order is entered at a stop price below the current market price. Investors generally use a sell stop order to limit a loss or to protect a profit on a stock that they own.

To understand where and how an order you place with your broker is executed, you should read Trade Execution: What Every Investor Should Know.  For more information on the different types of orders you can place when you buy or sell a stock, please read our investor bulletin “Trading Basics”.

 

We have provided this information as a service to investors.  It is neither a legal interpretation nor a statement of SEC policy.  If you have questions concerning the meaning or application of a particular law or rule, please consult with an attorney who specializes in securities law.