Stop-Loss Order
A stop-loss order uses a trigger price to activate a sell or buy order. It can be useful for risk control, but the final execution price is not guaranteed.
Start the lessonIntroduction
An order that starts at a trigger price
A stop-loss order stays inactive until the market reaches a price you choose, called the trigger price. Once triggered, it activates the order type selected in your broker's app. Many investors use a stop-loss sell order to try and cap a loss on shares they already own.
The short answer
Trigger price reached → the order activates → it may execute according to the selected order type and available market prices.
What is a trigger price?
The price that activates the order
The trigger and the eventual trade price are not necessarily the same.
- 1
Before the trigger
The stop order waits according to its validity and the broker/exchange rules.
- 2
Trigger condition is met
The order activates as a market order or limit order, depending on the type selected.
- 3
The order is processed
It may execute at available prices, be partly filled, or remain unfilled, depending on the order type and market.
₹1,000 example
Estimate a possible loss at the trigger
This simplified example assumes you bought shares for ₹100 each and set a stop trigger below that price.
Estimated difference if sold at the trigger price
₹100
(₹100 − ₹90) × 10 shares
With 10 shares bought at ₹100 and a trigger at ₹90, the difference at the trigger is ₹100. This is only an estimate assuming execution at exactly ₹90; the actual execution price and loss may be different, and charges are not included.
Market or limit after trigger?
Know what your broker's order type does
Availability, names, and rules can vary by broker, exchange, and product.
Stop-loss market
After the trigger, a market order seeks execution at available prices. It may execute below a sell trigger if prices move quickly or gap down.
Stop-loss limit
After the trigger, a limit order is placed. It respects its price boundary but may not execute if the market moves past that price.
What to keep in mind
A stop-loss cannot remove every risk
- The trigger price activates an order; it is not necessarily the price of the completed trade.
- A gap or fast price move can lead to execution at a different price or to no execution.
- A stop-loss limit order can remain unfilled if the market moves beyond its limit.
- The order may expire or be cancelled according to its validity and broker or exchange rules.
- Check the exact order type, trigger conditions, validity, and charges in your broker's app.
Key points
What to remember
- A trigger price activates the stop-loss order.
- A trigger is not a guaranteed execution price.
- A stop-loss market order seeks execution at available prices.
- A stop-loss limit order sets a price boundary but may not execute.
- Gaps and fast market moves can affect execution.
- A stop-loss may help manage risk but cannot remove it.
This lesson is for education only, not personalized financial, tax, or investment advice. Investments in securities are subject to market risks.
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