Glossary
What is Stop-Loss Order? Meaning, Example & Why It Matters
An order that triggers a buy or sell once the price reaches a set level, used to limit losses on a position.
A stop-loss order is designed to cap your loss on a trade. You set a trigger price; when the market reaches it, the order is sent to the exchange. A stop-loss limit order (SL) then becomes a limit order at your chosen price, while a stop-loss market order (SL-M) becomes a market order and executes at the best available price.
Why Stop-Loss Order matters to you
Stop-losses help enforce discipline. Many traders know where they should exit but hesitate when the moment comes. Placing a stop-loss in advance removes emotion and protects you if you are away from the screen. It is a basic risk management tool for intraday and leveraged trading.
Stop-losses are not guarantees. In a sharp gap down or fast market, an SL-M can fill well below your trigger due to slippage, and an SL limit order may not fill at all if the price jumps past your limit. Some exchanges and brokers restrict SL-M orders in certain segments for this reason.
Practical tip: set your stop-loss based on how much you are willing to lose, not on round numbers everyone else uses. Leave some gap between trigger and limit price in an SL order so it has a better chance of filling in fast markets.
Example: Illustrative only: if you buy a stock at ₹500 and set a stop-loss trigger at ₹480 with a limit of ₹478, your sell order activates when the price touches ₹480 and executes at ₹478 or better, limiting your loss to around ₹22 per share before charges.
See it in rupees: every charge and tax on a real trade, at every broker. Open the brokerage calculator
Related terms
- GlossaryLimit Order
An order to buy or sell only at a specified price or better, giving you control over the execution price.
- GlossaryMarket Order
An order to buy or sell immediately at the best price currently available in the market.
- GlossaryGTT Order (Good Till Triggered)
A standing instruction that places an order automatically when the price reaches your trigger, valid for an extended period.
- GlossaryBracket Order / Cover Order
Intraday order types that attach a compulsory stop-loss (cover order) or both stop-loss and target (bracket order).
Frequently asked questions
What is the difference between SL and SL-M?
SL becomes a limit order once triggered, so it may not fill if the price moves past your limit. SL-M becomes a market order and usually fills, but possibly at a worse price.
Does a stop-loss guarantee my exit price?
No. In fast or gapping markets, execution can happen at a different price or not at all.
Do stop-loss orders carry over to the next day?
Regular stop-loss orders are usually valid only for the day. For longer validity, check whether your broker offers GTT or similar orders.