What is Stop-Loss Order?

Details

How a stop-loss order works

A stop-loss is a conditional order rather than a plain market or limit order. On the major exchange interfaces you choose between a stop-limit order and a stop-market order. A stop-limit order places a limit order at your chosen price once the trigger is reached: the fill price is controlled, but the order may never fill if price gaps through the limit. A stop-market order executes at whatever price is available after the trigger is reached: it is far more likely to fill, but the execution price is not guaranteed. On futures markets the stop price also interacts with the liquidation engine. Exchanges calculate unrealised profit and loss from the mark price instead of the last traded price, which reduces the chance of a trigger being set off by a single wick. Each venue publishes its own mark-price method and parameters, and that document is the source of truth rather than any third-party summary.

Where to place a stop

Three anchors are common in practice:

• Market structure: a prior swing low, a neckline, or the lower boundary of a range.
• Volatility: a multiple of average true range (ATR), so the stop sits outside ordinary noise.
• A fixed share of account equity, so the amount at risk per trade stays constant.

Stop distance and position size are linked. If the amount at risk is fixed, a wider stop requires a smaller position. Risk-management material repeats that relationship, but the specific numbers depend on personal tolerance and there is no universally optimal setting.

Common mistakes

Moving the stop further away while a trade is losing removes the protection the order was meant to provide. Flipping direction the instant a stop is hit tends to get stopped again, because liquidity is often thin at that moment. On perpetual futures, funding paid during a long hold can move the break-even point noticeably. And a stop is not a guarantee of a fill: a stop-market order can slip in fast markets, while a stop-limit order can go unfilled if price jumps past the limit.

Risk warning and disclaimer

This entry is educational material, not investment advice, an offer, or a promise of any return. Crypto asset prices are volatile and a stop-loss order cannot guarantee execution at the level you set; slippage and non-execution are both possible in extreme conditions. Exchange rules and product parameters change over time, so confirm the details in the venue's own announcements. This page may contain affiliate links. If you visit a third-party platform through a link here, we may earn a commission, and that does not affect the independence of the content. Do not use these services if you are in a restricted region or where doing so would breach local rules. This site is an independent third-party publisher and is not affiliated with, endorsed by, or operated by any exchange. For background, see the crypto glossary index. To install a client, open the Binance app download page.

Key Points

• A stop-loss order closes a position automatically once the trigger price is reached, capping the loss on that trade.
• A stop-limit order controls the fill price but may not fill; a stop-market order fills more reliably but can slip.
• Stop distance and position size are linked: with a fixed risk amount, a wider stop means a smaller position.
• A stop is not a guaranteed fill, so slippage and non-execution are both possible in fast markets.

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