Stop-loss
A stop-loss is an order to close an open position automatically when price reaches a specified level beyond the entry price, in the loss-making direction.
It triggers at the stop level and executes as a market order. The fill price may differ from the trigger level — particularly in fast markets — but the position is closed once triggered.
This page covers the mechanic; it is not trading advice.
A stop-loss on a real position
A long EUR/USD position opened at 1.0850 with a stop-loss at 1.0820 means: if the bid price reaches 1.0820, the broker automatically closes the position at the next available market price. The 30-pip distance between entry and stop is the maximum intended loss before the stop triggers.
Actual loss may exceed the intended distance if the fill price gaps below 1.0820 in fast markets. The stop level is the trigger, not the guaranteed fill price.
Stop-loss as the input to position sizing
Position size is calculated from the stop distance and the account risk percentage, not chosen first.
For a $10,000 USD account targeting 1% risk per trade ($100) on EUR/USD: if the stop-loss distance is 25 pips, position size = $100 ÷ (25 × $10 per pip per standard lot) = 0.40 standard lots. If the stop-loss distance is 50 pips, position size = $100 ÷ (50 × $10) = 0.20 standard lots. If the stop-loss distance is 100 pips, position size = $100 ÷ (100 × $10) = 0.10 standard lots.
The same account risk produces different position sizes depending on stop distance. Tighter stops permit larger positions; wider stops force smaller positions. The trade-off is mechanical: tight stops are more likely to trigger inside normal price noise; wide stops produce smaller positions and lower potential reward at the same R-multiple.
A stop-loss without position sizing produces inconsistent risk per trade. Holding 1 standard lot on every position regardless of stop distance means a 25-pip stop risks $250 (2.5% of a $10,000 account) while a 100-pip stop risks $1,000 (10%). Consistent per-trade risk requires the stop to drive the size, not the other way around.
Related terms
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Common questions
Can a stop-loss execute below its trigger level?
Yes — the stop level is the trigger, not the guaranteed fill price. Once the market reaches the stop level, the position closes at the next available market price. In normal conditions the difference is small (under 1 pip). During data releases or weekend gaps, the difference can be material — a stop at 1.0820 may execute at 1.0810 if the market gaps through the level. Guaranteed-stop products (offered by some brokers as a paid feature) close at the exact stop level regardless of slippage, with the trade-off that the cost of guaranteed stops is built into the spread.
Should a stop-loss be set on every leveraged position?
A leveraged position without a stop-loss has open-ended downside. On a 1 standard lot EUR/USD position, an unprotected position in a 200-pip adverse move loses $2,000 — 20% of a $10,000 account — before the broker's margin call mechanism triggers (typically when equity falls to 50% of margin held). Margin calls execute slower than stop-losses and at market, not at a chosen level. The stop-loss is the trader's price-controlled exit; the margin call is the broker's mechanical floor. They serve different functions; the stop-loss is the more controllable of the two.