In plain English
What Stop order means
A stop order uses a price level as a trigger rather than as a promised execution price. A buy stop is commonly set above the current market, while a sell stop is commonly set below it. Once triggered, a standard stop order generally becomes a market order, so the actual fill can be worse or better than the stop level.
Why it matters
Stop orders can automate an entry after a price move or automate an exit from a position. Their main risk is that a trigger during volatility can lead to slippage. Platforms may use different trigger references, such as bid, ask, midpoint, or last-traded price, so the broker’s specification is material.
Example
EUR/USD trades at 1.0840/1.0842. A trader places a buy stop at 1.0860 to enter only if the market rises. When the platform’s applicable trigger reaches 1.0860, the order activates. If the next available ask is 1.0864, a standard market-style stop may fill at 1.0864 rather than 1.0860.
Quick answers
Common questions
Can a stop order open a position?+
Yes. A stop-entry order can be used to buy above the current market or sell below it after a specified price move. A stop-loss order is instead attached to an existing position to seek an exit if the market moves adversely.
What price triggers a stop order?+
That depends on the product and provider. A platform may use bid, ask, last-traded price, or another defined reference. The applicable trigger method should be stated in the broker’s order-execution documentation.
Sources