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. Where the venue offers a protective stop-limit, it controls the permitted fill price but can remain partially or wholly unfilled; not every platform offers one. 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 commission, swap and execution effects, not a maximum realised loss.
The realised loss can exceed the loss at the 30-pip distance if the fill comes below 1.0820 in fast or gapping markets. The stop level is the trigger, not the guaranteed fill price.
Stop-loss as the input to position sizing
Under fixed-percentage risk sizing, Position size is calculated from the account balance, the account risk percentage, the stop distance and the instrument's pip value.
For a $10,000 USD account targeting 1% risk per trade ($100 if the stop fills at its level, before commission) 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, within the account's available margin and the broker's minimum stop distance; 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; the dollar reward at the same R-multiple is unchanged, but the profit target sits further from entry. 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 before costs and slippage.
A stop-loss without position sizing produces inconsistent risk per trade. Holding 1 standard lot of EUR/USD on every position regardless of stop distance means a 25-pip stop risks $250 (2.5% of a $10,000 USD account) while a 100-pip stop risks $1,000 (10%). Consistent per-trade risk requires the position size to change whenever the stop distance changes, so that stop distance × pip value × lots stays at the same cash amount.
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 on a long position after a gap or fast move; on a short position the stop is a buy stop, checked against the ask, and can execute above its trigger. In an illustrative gap from above 1.0820 to an available bid of 1.0810, the fill can come back at 1.0810. Where a venue offers a protective stop-limit, it 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, where the venue offers one, 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.