What is a stop-loss order? How traders limit losses
By SendPay Business · · 2 min read
A stop-loss order is an instruction to sell automatically if the price falls to a level you choose. It is meant to cap how much you can lose on a trade without having to watch the market all day.
How a stop-loss works
- You buy at one price, say 100.
- You set a stop at a lower price, say 90.
- If the price falls to 90, the order triggers.
- It becomes a market order and sells at the best price available.
Why you may get less than your stop price
Once triggered, a stop-loss sells at whatever price the market offers. In a fast fall, or when the market opens after a gap, that can be well below your stop. This is called slippage.
Stop-limit and trailing stops
A stop-limit order turns into a limit order instead, so it will not sell below a price you set, but it may not sell at all if the price falls straight through. A trailing stop moves up as the price rises, keeping a set distance below the highest price reached.
Where SendPay fits
Order types vary by exchange, so check which ones are offered before you rely on them. SendPay platforms let your customers buy, sell and hold crypto next to their cash under your brand, with assets held with regulated partners and a trading fee you set. SendPay does not offer leverage or forex trading.
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This guide is general information, not legal or financial advice. SendPay Business is a technology company, not a bank, and does not take deposits; regulated services on the platforms are provided by licensed partners. PayPal, Patreon and Substack are named as reference points only and are not affiliated with SendPay Business.