Stop Order
Market Microstructure glossary · Limit Order Book Mechanics & Order Routing Logic
Definition
An order that becomes a market order when the market trades at or through a specified stop price.
Stop Order in plain English
A stop order is an instruction that sits dormant until the price hits a level you pick, and only THEN springs into action as a regular market order (buy or sell right now at whatever price is available). People mostly use it as a safety net: if you own a stock at $50 and set a sell stop at $45, you're saying 'if it ever sinks to $45, get me out before it falls further.' It's like a smoke alarm — silent until the trigger condition is met, then it fires instantly. One catch: once triggered it takes the going price, which in a fast-moving market can be a bit worse than your stop level.
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