<p>A <strong>Stop Order</strong> is an instruction to buy a security when its price rises to a specified level above the current market price, or to sell when the price falls to a specified level below the current market price. Once the stop price is reached, the order is triggered and executed as a <a href="/NewSite/encyclopedia/market-order/" class="ency-link">market order</a> at the best available price. Traders use stop orders to enter positions in the direction of prevailing momentum or to protect existing trades by limiting potential losses.</p>

<h2>How It Works</h2>
<p>When a trader places a stop order, they set a stop price that acts as a trigger. For a buy stop, the stop price is above the current ask; for a sell stop, it is below the current bid. The order remains inactive until the market price touches or passes the stop price. At that moment, the stop order converts into a market order and is filled at the next available price, which may be slightly different from the stop price due to slippage, especially in fast‑moving or illiquid markets. On platforms such as MetaTrader 5, stop orders can be attached to charts, modified, or cancelled before execution.</p>

<h2>Why It Matters for Traders</h2>
<p>Stop orders provide a systematic way to automate trade entry and risk management. By using a buy stop, traders can capture breakouts without constantly watching the screen, ensuring they participate when price moves upward with conviction. A sell stop helps lock in profits or limit losses on existing long positions by automatically exiting if the market reverses. Because the order becomes a market order after triggering, execution is guaranteed, though price certainty is not. This makes stop orders suitable for strategies that prioritize participation over precise entry prices, such as trend‑following or volatility‑based approaches.</p>

<h2>Example</h2>
<table>
<tr><th>Scenario</th><th>Current Price (EUR/USD)</th><th>Stop Price</th><th>Action</th></tr>
<tr><td>Buy stop for breakout</td><td>1.0850</td><td>1.0870</td><td>If price rises to 1.0870, a market buy is sent.</td></tr>
<tr><td>Sell stop to limit loss</td><td>1.0850</td><td>1.0830</td><td>If price falls to 1.0830, a market sell is sent to close the long position.</td></tr>
</table>
<p>Assume a trader holds a long EUR/USD position at 1.0850 and sets a sell stop at 1.0830. If the price drops to 1.0830, the stop order triggers and becomes a market sell. The position is closed at the best available price near 1.0830, limiting further downside. Conversely, a trader expecting an upward breakout might place a buy stop at 1.0870; once the price reaches that level, the order executes, allowing the trader to ride the ensuing move.</p>

<h2>Key Takeaways</h2>
<ul>
<li>A <strong>Stop Order</strong> becomes a market order once the predefined stop price is reached.</li>
<li>It is used to enter trades in the direction of price momentum or to exit positions to manage risk.</li>
<li>Execution is guaranteed after triggering, but the exact fill price may vary due to slippage.</li>
<li>Platforms like MetaTrader 5 allow traders to place, modify, and monitor stop orders directly from the chart.</li>
</ul>