A stop order is an order instruction with a trigger price.

A stop order is an order instruction with a trigger price. It does not enter the market immediately. It becomes active only when the market reaches the trigger level. Once triggered, it is submitted as a market order. That means its execution price is determined by the available liquidity at that moment rather than by the trigger price itself.

This mechanism matters because a market order prioritizes execution over price. A stop order therefore changes state in two steps. Before the trigger, it is inactive. After the trigger, it behaves like a market order and inherits the same execution risks, including execution at a price worse than the trigger if the market moves quickly or available size at the best price is limited.

A worked example makes the transition clear. If a long position uses a sell stop with a trigger at 100 and the next available bids after the trigger are 99.8 for part of the size and 99.6 for the remainder, then an average fill of 99.7 implies slippage of 100 minus 99.7, which equals 0.3 below the trigger. The trigger activates the order, but it does not guarantee execution at the trigger.

For systematic trading, this distinction is important in simulation and live execution logic. A stop condition is a state change rule. The fill that follows is a market order outcome. Treating the trigger price as the fill price can understate execution risk and distort strategy evaluation.

A stop order is therefore best understood as a conditional instruction that converts into a market order when its trigger is reached, with all of the price uncertainty that a market order can carry.

Covered in depth in the Cross-venue market data & signals pillar hub.