Stop-loss
A stop-loss is a protective exit instruction activated by a specified price condition; its execution mechanics depend on the venue and order type.
A broker-defined plain stop-loss may submit a market order, so its fill can differ from the trigger. A stop-limit controls the permitted fill price but can remain partially or wholly unfilled. Other protected or guaranteed-stop products follow their published terms.
This page covers the mechanic; it is not trading advice.
A stop-loss on a real position
In a broker-defined plain-stop example, a long EUR/USD position opened at 1.0850 with a sell-stop trigger at 1.0820 submits a market order if the bid reaches the trigger. The 30-pip distance is the intended price distance before costs and execution effects, not a maximum realised loss.
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. The relationship between the stop distance and the profit target is the Risk-reward ratio, which sets the win rate a strategy needs to break even.
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?
A broker-defined plain stop-loss that submits a market order can execute below its sell-stop trigger after a gap or fast move. In an illustrative gap from above 1.0820 to an available bid of 1.0810, the fill could be 1.0810. A stop-limit will not execute beyond its limit but can remain unfilled. Some brokers offer guaranteed-stop products under separate eligibility, distance, and fee terms.
Should a stop-loss be set on every leveraged position?
There is no universal order choice for every leveraged position. A stop-loss can provide a predefined trigger for a protective exit, but a plain stop does not guarantee the eventual fill price and a stop-limit can remain unfilled. Broker margin-call and stop-out processes are separate controls with broker-defined thresholds and execution rules. The appropriate instruction depends on the product, venue, gap risk, and the account's documented terms.