Stop-Loss Order

A stop-loss order is an instruction to close a position automatically if the price moves against you to a predefined level, limiting how much you can lose on the trade. For a long position it is a sell order triggered when the price falls to the stop price; for a short position it is a buy order triggered when the price rises to it.

For example, if you buy ETH at $3,000 and set a stop-loss at $2,850, the exchange will submit a sell order once ETH trades at or below $2,850, capping your planned loss at roughly 5%. Most implementations trigger a market order at that point, so in a fast crash the actual fill can be worse than $2,850.

Stop-losses are a core risk-management tool, but they are not a guarantee of a specific exit price: gaps, thin liquidity, and exchange outages can all cause fills well below the stop level. Crypto markets trade around the clock and can be volatile, so stops placed at obvious levels sometimes get triggered by brief wicks before the price reverses, which is why placement matters as much as having a stop at all.