Define: Stop Order

UK Accounting Glossary

Definition: Stop Order



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Full Definition of Stop Order


A stop order is an order to automatically liquidate a stock position when the stock’s price reaches a certain point. A stop order liquidates a position at the best price possible once the target price has been touched. A stop order can be used to either lock in profits or to minimize a loss. Many investors place their stop order as a trailing stop in order to take advantage of a favourable market trend for as long as possible. For example, an investor who is long XYZ Corporation at $10.00 per share might place a trailing stop order 5% (or 50 cents) below the current market price. If the price per share drops 5% the stop order automatically liquidates the position, limiting the investor’s losses. If the market starts up, the trailing stop order follows the stock, always remaining 5% below the stock’s highest price. When the stock ultimately drops 5% below its highest price the stop order automatically liquidates the position, locking in a profit. A stop order is an important tool for managing risk.


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Stop Order. PayrollHeaven.com. Payroll & Accounting Heaven Ltd. https://payrollheaven.com/define/stop-order/ (accessed: April 04, 2020).
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Stop Order. PayrollHeaven.com. Retrieved April 04, 2020, from PayrollHeaven.com website: https://payrollheaven.com/define/stop-order/

Definition Sources


Definitions for Stop Order are sourced/syndicated and enhanced from:

  • A Dictionary of Economics (Oxford Quick Reference)
  • Oxford Dictionary Of Accounting
  • Oxford Dictionary Of Business & Management

This glossary post was last updated: 6th February 2020.