A stop order, sometimes called a stop-loss order, is used to limit losses; it instructs the broker to execute a trade when a stock reaches a price beyond which the investor is unwilling to sustain losses. For buy orders, this means buying as soon as the price climbs above the stop price.
Then, what is a limit price?
A limit order is an order to buy or sell a stock at a specific price or better. A buy limit order can only be executed at the limit price or lower, and a sell limit order can only be executed at the limit price or higher. A limit order is not guaranteed to execute.
What is a stop vs a stop limit?
There's a subtle -- yet important -- difference between stop-loss and stop-limit orders. A stop-loss order becomes a market order when a security sells at or below the specified stop price. It is most often used as protection against a serious drop in the price of your stock.
What is a limit price in trading?
A limit order is an order that sets the maximum or minimum at which you are willing to buy or sell a particular stock. For instance, if you want to buy stock JCP, which is trading at $5.60, you can set a limit order for $5.50. This guarantees that you will pay no more than $5.50 to buy this stock.