Help Center > Investing > Investing with Stocks: The Basics

Stop order

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

When the stock hits your stop price, the stop order becomes a market order and is executed at the best price currently available. The market order may be subject to collaring if you’re using a version earlier than 2023.6.0 of the app, or if your app experience hasn’t been changed yet. Stop orders are used to trigger a purchase should the stock price hit or go above the stop price. Or trigger a sell should the stock price hit or drop below the stop price.

Buy stop order

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. If you’re using a version of the app earlier than 2023.6.0 or if your app experience hasn’t been changed yet, your order may be subject to collaring.

Example

MEOW is currently trading at $6 per share. You want to wait to purchase MEOW until it reaches $8 because you think it’ll rise much higher, but only after it reaches $8, so you set your stop price to $8.

If MEOW rises to $8 or higher, your buy stop order becomes a buy market order. Then, MEOW is purchased at the best price currently available to Robinhood.
If MEOW stays below $8, a market order isn’t triggered, and no shares are purchased.

This example is shown for illustrative purposes only. Please note that in some cases only a portion or none of your order may get executed if there are insufficient shares available at certain prices (or if the market order is subject to collaring, the price moves outside the price collar). Understanding order types can help you manage risk and execution speed. However, you can never eliminate market and investment risks entirely. It’s best to choose an order type based on your investment goals and objectives.

Sell stop order

With a sell stop order, you can set a stop price below the current price of the stock. If the stock falls to your stop price, your sell stop order becomes a sell market order. If you’re using a version of the app earlier than 2023.6.0 or if your app experience hasn’t been changed yet, your order may be subject to collaring.

NOTE: Stop orders created incorrectly or at a price that can’t be executed may be rejected. Check out Why was my order rejected for more details.

Example

You purchased MEOW for $10 a few months ago. It’s currently trading at $20 per share ($10 unrealized profit). Your goal is to make at least $5 per share if the price were to drop. So you create a sell stop order at $16.50. If MEOW reverses itself and starts to drop below the stop price of $16.50 it becomes a sell market order.

If MEOW falls to $16.50 or lower, your sell stop order becomes a sell market order. Then MEOW is sold at the best price currently available.
If MEOW stays above $16.50, a market order isn’t triggered, and you keep your shares.

This example is shown for illustrative purposes only. Note that in some cases only a portion or none of your order may execute if shares aren’t available at certain prices (or if the market order is subject to collaring, the price moves outside the price collar). Understanding order types can help you manage risk and execution speed. However, you can never eliminate market and investment risks entirely. It’s best to choose an order type based on your investment goals and objectives.

Over-reserving buying power

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.

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