When Price Gaps Through Your Stop

A stop limits losses only if the stock trades near it. When price opens far below, the loss can be much bigger than planned. Here is a real example and how to prepare.

Stops are not guarantees

A stop order triggers when the stock trades at your stop price or worse. If bad news comes out overnight and the stock opens 15% lower, your stop does not fill at your price. It becomes a market order at the open and sells near wherever the stock is trading then.

Gaps: price jumps from one level to another with no trading in between.

Unlock all of Investing School

The rest of this lesson, its chart examples and quiz are part of Investing School. Start free with Stock Market Fundamentals and the first lesson in every category.