NB! Stop orders do not guarantee the price your order will be filled with, as the order executes as a market order with the best possible price at that moment. Market order prices can fluctuate depending on the trading volume.
The primary purpose of a stop order is to automatically sell an asset when its price reaches a specified level, helping investors and traders protect their capital and manage their risk.
Is a stop order available for all stocks?
No, due to operational reasons you can only use this order type for stocks traded on US exchanges. We are looking into the possibility of introducing stop orders to other currencies and instruments as well.
How does a stop order work?
After placing the stop order, it remains active until the stop price you set is reached, but it’s important to highlight that once the stock price meets your set level, your order will execute as a market order at the best possible price that’s available at that time. Keep in mind that in fast-moving markets, the execution price may be different from your stop price due to the trading volume (meaning how many counterparties are trading) and therefore your order may not fill at the stop price you set. Read more about market orders here.
How do I change the order type to a stop order?
When you start placing an order, it’s always a market order by default. Tap on Market Order at the top right corner and choose another type you want.
How to set up a stop order?
- If the stock is trading under 10 USD, the stop price has to be at least 1% higher for a buy order and 1% lower for a sell order than the current market price. This is due to operational reasons with our Brokerage partner and helps to ensure the order is accepted in case of rapid price movements
- Before confirming a stop order, you can choose whether it should expire or not
Stop order pros
- Automation: You set a price, and when the market hits that price, the order executes. This can be helpful if you can't monitor the market constantly
- Risk management: They help manage risk by limiting potential losses. A stop order, for instance, can sell a stock if it drops below a certain price, preventing further losses
Stop order cons
- Trading volume: If there's a significant gap between the stop price and the actual execution price, the order might not execute at the expected price
Remember, stop orders are just one tool among many in the investing toolbox. They can be beneficial for risk management but should be used in consideration of market conditions and individual investment strategies.
See also Market and Limit orders and Repeat Orders