Definition
A stop order is an instruction that stays inactive until the market reaches a chosen trigger price, after which it becomes a live order. A standard stop becomes a market order when triggered, so its fill price is not guaranteed.
How it works
A sell stop sits below the current price and is often used to exit a long position if the market falls; a buy stop sits above it and can exit a short position. The trigger may be based on the last trade, bid, ask or mark price, depending on the venue and broker.
A stop-limit order becomes a limit order at trigger, which caps the fill price but may leave the order unfilled in a fast move. Gaps, thin liquidity and trading halts can make a stop execute well beyond its trigger price.
Formula / convention
Sell stop triggers when the market price ≤ stop price; buy stop triggers when the market price ≥ stop price
Illustrative example
Illustrative: you hold 200 shares of a fictional stock trading at HK$50.00 and place a sell stop at HK$48.00. Overnight news makes the stock open at HK$45.00, so the stop triggers and becomes a market order that fills near 45.00, not 48.00. The fill is 3.00 per share worse than the trigger, or 3.00 × 200 = HK$600 in total; a stop-limit with a 48.00 trigger and 47.50 limit would instead have stayed unfilled because the market opened below its limit.
What to watch for
A stop order is a trigger, not a price guarantee: it can fill far from the stop price in gaps or fast markets, and a stop-limit may not fill at all. Trigger rules, supported order types and after-hours handling differ by venue and broker.