Sell stop
Family II · Orders
Not to be confused with stop loss, stop limit order, stop order.
Sell stop is a conditional order placed below the current market price that instructs the broker to sell at the best available price once the trigger is reached. It is a market order in waiting: the stop level activates the order, but the fill price is whatever the market offers after activation. Traders use it to exit long positions or enter short positions when price breaks a chosen level.
How a sell stop works
A sell stop rests in the order book until the market trades at or through the stop price. At that moment the order converts to a market sell order and is filled at the next available bid or bids. Because the conversion is to a market order, the actual fill can be worse than the stop price, especially in fast or thin markets. The order does not guarantee a specific price, only that a sale will be attempted once the trigger is hit.
Sell stops can be used to open a short position (a sell stop below the market in a downtrend) or to close a long position (a protective sell stop below the entry price). In both cases the trigger is below the prevailing market price at the time the order is placed.
Worked example
The stop price was 47.00, but the fill occurred at 46.85 because the market moved lower before the sell order could be executed. The difference between the stop price and the fill price is slippage.
Placement and risk
A sell stop must be placed below the current market price. If it is entered above the market, it may be rejected or treated as a different order type depending on the venue. The distance between the market price and the stop price determines how much adverse movement is tolerated before the position is closed. A stop placed too close to the market can be triggered by normal price noise; one placed too far away allows a larger loss.
Sell stops are not guaranteed to execute at the stop price. Gaps, halts, and low liquidity can cause fills significantly away from the trigger. Some markets and brokers restrict stop orders to certain sessions or require them to be entered as stop-limit orders to control the worst-case fill price.
Often confused with
- stop loss
- A stop-loss is a general risk-management instruction to exit a position at a predetermined loss level, while a sell stop is the specific order type that implements it; the visible sign is that a stop-loss describes an intent, whereas a sell stop is an order ticket with a stop price and a side.
- stop limit order
- A stop-limit order becomes a limit order after the stop is triggered, so it may not fill if the market moves past the limit, whereas a sell stop becomes a market order and fills at the next available price; the visible sign is the presence of a limit price alongside the stop price on a stop-limit order.
- stop order
- A stop order is the parent category that includes both buy stops and sell stops, while a sell stop is specifically the sell-side version; the visible sign is the order side, with a sell stop always placed below the market and a buy stop always above it.