Stop order
What is a stop order, and why does it guarantee an execution but not a price?
In plain words
A stop order sits dormant until the market reaches a chosen trigger price. Once that price is touched, the stop becomes a market order, meaning it buys or sells at whatever prices are then available rather than at the trigger.
Why it matters
A stop is meant to cap a loss or lock a gain, but converting to a market order means it fills at the next available price. In a fast or thin market that price can be well past the trigger, so the realised exit is worse than planned.
In a real week: ETH, week of 23 September 2019
ETH opened the week of 23 September 2019 at 211.2 and fell 19.87% to close at 169.24, with a range of 41.09% from a 211.68 high to a 150.03 low on Tuesday, 24 September at 19:00 UTC. The largest one-hour move was -12.71% at 18:00 UTC that day, and volume ran 1.87 times the prior 12-week average. A stop triggered near that low would have executed in a market moving that fast, at a price below the trigger.
A common mistake
Treating the trigger price as the exit price. A stop order controls whether you get out, not where, so a gap or a fast candle can slip the fill.