A stop order is an order to buy or sell a stock once the stock reaches a specific price, also known as the stop price.

When the stock reaches your stop price, the stop order becomes a market order and is executed at the best price currently available during market hours only.

Stop orders are used to trigger a purchase if the stock price reaches or goes above the stop price. They’re also used to trigger a sell if the stock price reaches or drops below the stop price.

It's important to keep the following in mind when placing a stop order:

• The stop price does not guarantee execution price. A stop order becomes a market order when the stop price is triggered, and Robinhood is required to execute a market order fully and promptly at the current market price. Therefore, the price at which a stop order ultimately is executed may be very different from the stop price, especially during times of increased market volatility.
• Stop orders may be triggered by a short-lived swing in price. During periods of volatile market conditions, the price of a security can move significantly in a short period of time and trigger the execution of a stop order (and the security may later resume trading at its prior price level). If your stop order is triggered under these circumstances, it may sell at an undesirable price even though the price of the security may stabilise during the same trading day.
• Sell stop orders may exacerbate price declines during times of extreme volatility. The activation of sell stop orders may add downward price pressure on a security. If triggered during a precipitous price decline, a sell stop order also is more likely to result in an execution well below the stop price.
• Placing a limit price on a stop order may help manage some of the risks. A stop order with a limit price (a stop limit order) becomes a limit order when the stock reaches the stop price. A limit order is an order to buy or sell a security for an amount no worse than a specific price (or the limit price). By using a stop limit order instead of a regular stop order, you will receive additional certainty with respect to the price you receive for the stock. However, investors also should be aware that, because brokers cannot sell for a price that is lower (or buy for a price that is higher) than the limit price selected, there is the possibility that the order will not be executed at all. You are encouraged to use limit orders to prioritise achieving a specific target price over an immediate execution irrespective of price.

With a buy stop order, you can set a stop price above the current price of the stock. If the stock rises to your stop price, your buy stop order becomes a buy market order.

To protect your account against overspending, we’ll over-reserve your buying power for stop buy orders and trailing stop buy orders.

• For Good-For-Day orders that you enter during market hours, we’ll reserve an additional 5% of buying power.
• For other orders, we’ll reserve an additional 10% of buying power.

Keep in mind, these percentages might change in response to extreme volatility.

The examples included in this article are for illustrative purposes only. In general, understanding order types can help you manage risk and execution speed. However, you can never eliminate market and investment risks entirely. It’s usually best to choose an order type based on your investment goals and objectives.

All investments involve risks, including the loss of principal. Investors should consider their investment objectives and risks carefully before investing.

Robinhood Singapore Pte. Ltd. (“RHSG”) (Reg. No. 202416011D) is licensed by the Monetary Authority of Singapore as a capital markets services licensee permitted to deal in capital markets products, and does not provide tax, legal, or investment advice or recommendations. Products and services offered in Singapore are provided by RHSG, and nothing in the published material constitutes an offer or solicitation to conduct business in any other jurisdiction.