Stop and stop-limit orders

Stop orders are conditional: they sit dormant until the price reaches a level you set (the trigger or stop price), and only then do they activate. They are the main tool for protecting a position automatically.

The stop order (stop loss)

A stop order is most often used as a stop loss — an order that sells your shares if the price falls to a level you can no longer tolerate, capping your loss without you having to watch the screen.

Example: you own a stock bought at R$ 50 and decide you will not accept a loss beyond R$ 45. You place a stop at R$ 45. While the price stays above R$ 45, nothing happens. If it touches R$ 45, the stop triggers and turns into a market order to sell — getting you out near that level.

Because a plain stop becomes a market order once triggered, it guarantees you exit but not the exact price (slippage applies, especially in a fast drop).

The stop-limit order

A stop-limit adds a second number for control. It has two prices:

• The stop (trigger) price — at which the order activates.
• The limit price — the worst price you will accept once it activates.

Example: stop at R$ 45, limit at R$ 44.50. If the price hits R$ 45 the order activates, but it will only sell down to R$ 44.50 — no lower. This protects you from a terrible fill, but with a risk: if the price gaps straight past R$ 44.50, the order may not fill at all, leaving you still holding the falling stock.

Choosing between them

• Use a plain stop when getting out is more important than the exact price (you accept slippage to guarantee the exit).
• Use a stop-limit when you want a price floor and can accept the chance of no fill.
• Stops also work in reverse to enter — a buy stop placed above the price activates when the stock breaks out upward.

Stops let you pre-decide your exit calmly, instead of freezing when the price is falling. We treat position sizing and where to place stops in more depth in the Risk Management material.