Stop Loss
A stop loss is an order that closes a position automatically once the price moves a set amount against you. It caps how much you lose on one trade, as long as the market can actually fill it near your price.
How a stop loss works
You choose a trigger price, called the stop price. While the market stays above it (for a long position), nothing happens. Once a trade prints at or through the stop price, the exchange sends an order to close your position.
On most platforms a plain stop loss becomes a market order when triggered. That means it is filled at the best available price at that moment, which may be worse than your stop price. A stop-limit order is the variant that sets a minimum price, at the cost of possibly not filling at all.
An example
Say you buy 1 ETH at 2,000 dollars and decide you are not willing to lose more than 10 percent on this trade. You place a stop loss at 1,800. If the price falls to 1,800, your ETH is sold automatically. In a calm market you might get 1,798. In a fast crash you might get 1,750, because the buy orders near 1,800 were already gone. That difference is slippage.
Why traders use stop losses
A stop loss turns a vague plan into a rule. It decides your exit before emotions get involved, it protects you when you are not watching the screen, and it lets you size positions sensibly: if you know the distance to your stop, you know your maximum planned loss.
For leveraged trades it is especially important, because a stop placed before the liquidation price lets you exit on your own terms instead of having the exchange close the position and charge liquidation fees.
Limits and common mistakes
Stops placed too tight get triggered by normal price noise, so you are knocked out of a trade that later moves your way. Stops placed at obvious round numbers can sit where many other stops cluster, and quick wicks through those levels are common.
A stop loss is not a guarantee. Gaps, exchange outages and thin order books can all produce fills far from your stop price, and a stop is usually held by the exchange, so it depends on that exchange working.
Ask Coach about it
Coach is the AI on AtenaCrypto. It explains crypto with live market data, in plain words.
How do I decide where to place a stop loss based on volatility rather than a fixed percentage?Ask Coach →
Frequently asked questions
Does a stop loss guarantee my exit price?
No. A standard stop loss becomes a market order, so in a fast move it can fill below your stop price. Only the trigger is fixed, not the fill.
Where should a stop loss be placed?
Many traders place it at a level where their trade idea is proven wrong, such as below a support area, rather than at an arbitrary percentage. The right distance depends on the asset's volatility and your position size.
What is the difference between a stop loss and a stop-limit order?
A stop loss usually fills at market once triggered. A stop-limit becomes a limit order with a price floor, so it controls the price but may not fill at all if the market drops past your limit.
Related terms
Learn it step by step
AC Learning explains these ideas in interactive lessons — the first eight sections are free.
Open AC Learning → Create a free accountAll glossary terms · Educational reference only — not investment, legal, tax or financial advice.