How a stop order works
A stop order is an instruction that becomes active only when the price reaches a trigger level, at which point it turns into a market order. Its main use is the stop-loss: an order to exit a losing trade automatically once the price moves against you to a set point. A buy stop sits above the market and a sell stop below, so each triggers when the price crosses its level.
Worked example
You are long a stock at $50 and place a sell stop at $48 to cap your loss. If the price falls to $48, the stop triggers and sends a market order to sell, exiting you near $48. If a gap jumps the price straight to $45, your stop still triggers but fills near $45, because a stop becomes a market order and cannot guarantee the exact level.
Stop orders on Volity
The stop-loss is the most important risk tool on the platform: it enforces your exit before emotion takes over. On Volity, setting a stop the moment you enter, sized so the loss at the stop is 1 to 2 percent of equity, is the core of position sizing. A stop-limit adds price control at the cost of fill certainty.
Why it matters
A stop order is what turns a planned risk into an enforced one, and traders who skip it are the ones who let a small loss become an account-ending one. Set it at entry, every time. Related: trailing stop and stop-out.
Learn more in our forex trading guide.
