A stop-loss sits inactive until the market reaches its trigger price, at which point it submits an order to close the position. Its purpose is to cap the size of a loss without requiring anyone to watch the screen, and to make the exit decision in advance rather than during a sharp move.
Two mechanics are worth knowing. A stop-market order fills at whatever is available once triggered, which in a fast drop can be well below the trigger; a stop-limit names a floor price but may not fill at all if the market gaps through it. Stops also cluster at obvious round numbers, and price moves that sweep those clusters before reversing are a well-documented pattern.
Is a stop-loss guaranteed to fill at my price?
No. The trigger starts the order; the fill depends on available liquidity. In a rapid decline a stop-market order can complete meaningfully below the level you set.
Last updated October 17, 2026