A stop order is not a different way of pricing a trade — it is a way of delaying one. You choose a trigger price, called the stop. Nothing happens while the market stays away from that level. Only when the price reaches the stop does the order wake up and become a live order sent to the exchange.
Stop-loss orders
A stop-loss is usually set to limit a loss. Imagine you hold shares and have decided you would rather exit if the price falls to a certain level. You place a stop-loss sell with the stop at that level. When the share trades at or below the stop, the order triggers and is sent to the exchange as a market order to sell.
Stop-limit orders
A stop-limit order adds a price limit to the triggered order. When the stop is reached, the order becomes a limit order instead of a market order. That gives you control over the worst price you will accept — but the trade may not happen at all if the price races straight past your limit.
| Order | Trigger | What happens after the trigger | Main risk |
|---|---|---|---|
| Stop-loss | Price reaches the stop | Becomes a market order | The fill price can be worse than the stop |
| Stop-limit | Price reaches the stop | Becomes a limit order | It may not fill if the price jumps past the limit |
- 1Set the stopYou choose the trigger price and place the order with your broker.
- 2WaitWhile the market is away from the stop, no order reaches the exchange.
- 3TriggerWhen the price touches the stop, the order activates automatically.
- 4SendIt is sent as a market order or a limit order, depending on the type.
Order book simulator
See how a hypothetical order would be filled against the resting buy and sell orders.
Sellers (asks)
| Price | Quantity |
|---|---|
| ₹105 | 500 |
| ₹104 | 300 |
| ₹103 | 200 |
Buyers (bids)
| Price | Quantity |
|---|---|
| ₹102 | 400 |
| ₹101 | 700 |
| ₹100 | 900 |
Place a hypothetical order
Filled quantity
500 shares
Average fill price
₹104
Unfilled
0 shares
Fill breakdown
- 200 @ ₹103
- 300 @ ₹104
This is important
That jump is called a gap. If a share closes at ₹100 and opens at ₹92 the next morning, a stop set at ₹98 does not fill at ₹98 — it fills somewhere around ₹92 or lower, because there was no trading in between at your level.