Stop-loss

Stop-loss describes an order or rule intended to close or reduce exposure after an adverse price move. For an ordinary stock stop, FINRA describes a market order activating when the trigger price is reached. A long position typically uses a sell stop below the current price, and a short position a buy stop above it. The same mechanism can protect an existing gain, so the name does not mean every exit ends in a loss. [1]

A chart price need not be the price that determines activation. The SEC distinguishes brokers using the last trade from those using quotations; Kraken specifies the last trade or an available index for the product described. First verify the signal source, order side and activation condition for the particular market. A candle touching a level on another source alone does not prove that an order should have been created or executed on that platform. [2] [3]

Once an ordinary stop-market activates, it seeks available counterparties, not a promised trade at the trigger price. Coinbase describes market orders filled at multiple price levels according to quantity and the orders in the book. A price gap and shallow depth can worsen the outcome. However, an unrestricted model order cannot stand for every product: CME has stop with protection using a protected price range. Such a constraint can prevent a complete exit. [6] [4]

A stop-limit creates a limit order after activation. For a sale it sets the lowest acceptable price, and for a purchase the highest; trigger and limit prices need not be identical. Without counterparties at acceptable prices, the order may remain wholly or partly unfilled. Preserving the limit is therefore not the same as closing the position and does not itself cap further losses on the held asset. The SEC describes this property for stocks, while Coinbase documents stop-limit for its product. [2] [5]

FINRA warns that a short, sharp decline can trigger a stop before the price recovers. That does not reverse an executed trade. A trailing stop also adjusts its trigger level during favorable moves by the chosen distance, but does not move it back in the same way when the price reverses. The SEC describes this mechanism for stocks; availability and the exact crypto product variant require separate verification. A moving stop is neither a forecast nor a guaranteed profit. [1] [2]

Kraken explicitly warns that the standalone stop it describes is not automatically tied to a position; closing the position another way may require canceling it. By contrast, Coinbase describes attached TP/SL orders linked to the filled quantity of the parent order and rules for canceling the other side. The same behavior cannot be assumed everywhere. Checks include remaining quantity, partial fills, order validity and any reduce-only setting. [3] [5]

CME links stop distance with quantity and the chosen amount at risk. A level alone, without position size and costs, therefore does not determine monetary loss. Nor does a submitted order guarantee uninterrupted operation: Coinbase rules allow intervention in trading and open orders during technical problems. Status must be checked against confirmations and actual fills. An instruction stored only in a local program also depends on that program operating and being connected. [7] [6]

The assessment record should separate trigger price, individual fills, their volume-weighted average, costs and the unclosed remainder. The difference between planned and actual execution must not be counted again as another loss if already included in the exit price. An unfilled stop-limit does not mean zero economic loss; it means continuing exposure. Comparisons between order types must therefore state whether an outcome is realized or merely a current valuation of an asset still held. [6] [1]