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WHY BOTS FAIL

What Is a Stop Loss Order?

Short answer

A stop loss order closes a position when the price reaches a stop price. A plain stop becomes a market order at that price, so it fills at the next available price, which may be worse.

An instruction to leave a trade if the price reaches a set level. Which kind of stop you use decides what happens when the price jumps past it.

The page explains the idea in plain words, works through the arithmetic with a table, and shows how it hits grid, martingale and DCA bots, then tells you what to check before you run one.

  • A worked example with real arithmetic
  • How it hits grid, martingale and DCA bots
  • How to check for it before you run a bot
  • No advice, no signals, no profit promises

Last reviewed 28 October 2026. Education only, not advice.

Free, no account Runs in your browser Worked numbers shown Not advice Examples labelled

Ready to go further

Next: work out your stop and the loss

The stop loss calculator gives the stop price and the loss in dollars for your entry, size and risk.

Reading time4 minutes
Worked exampleExact arithmetic
Tools linked2 on this page
Reviewed28 Oct 2026

What is included

  • What it is, in plain words
  • The formula or mechanism, with exact arithmetic
  • How it hits grid, martingale and DCA bots
  • A check you can run before you switch a bot on

Who it is for

  • People who run or plan to run a trading bot
  • Anyone reading a backtest or a bot sales page
  • Readers who want the numbers, not the pitch
  • Not advice, and not a signal service
Loss on 100 units: the stop you planned and what a gap through it can cost$200Plannedstop at 98$500Stop, marketgap to 95$500Stop limitno fill, still openMade-up: bought 100 units at 100, stop at 98, limit 97.5, the next open is 95. The third bar is a paper loss on a position that is stillopen. Calculated by us on 28 Oct 2026, exact.
The picture for this page. Example numbers are made up unless the page says they were calculated.

Key facts

  • A stop loss order closes a position when the price reaches a stop price. A plain stop becomes a market order at that price, so it fills at the next available price, which may be worse.
  • A stop limit order becomes a limit order instead. It will not fill below its limit, so in a fast fall it may not fill at all and the position stays open.
  • In the made-up example below, a stop planned to lose $200 loses $500 if the price gaps to 95 (calculated by us on 28 Oct 2026, exact).
  • A trailing stop follows the highest price by a fixed distance and only moves in your favour. It protects a profit but is hit by ordinary pullbacks.
  • A bot must choose the order type deliberately. The stop is where a loss is meant to end, and it does not fix where the loss does end.

The three kinds, in plain words

  • Stop (stop market). When the price touches the stop price, a market order is sent. It nearly always fills, and the price you get may be below the stop in a fast move.
  • Stop limit. When the price touches the stop price, a limit order is sent at the limit price or better. The price is controlled, and the fill is not. If the price runs through the limit, the order sits unfilled.
  • Trailing stop. A stop that moves up behind a rising price by a fixed distance, or percent, and never moves down.

Rules differ between brokers and markets. Some do not support all three, and some treat the stop price as a trigger on the last trade and others on the bid or the mark price, so read the order rules of the platform you use.

A worked example: the gap

You buy 100 units at 100 and set a stop at 98. The plan is to lose at most (100 - 98) x 100 = $200. Overnight the price gaps down and the next trade is at 95, below the stop.

Planned loss = (entry - stop) x units
Loss with a stop market order = (entry - fill price) x units

A plain stop becomes a market order and fills near 95, so the loss is (100 - 95) x 100 = $500, which is 150% more than planned. A stop limit with a limit of 97.5 does not fill, because 95 is below the limit. The position is still open with a paper loss of $500 and a price that may keep falling. Neither is a failure of the order: each did what it says. The cost is that the loss was set by the market, not by the plan.

A made-up price and its trailing stop (2 points behind the high)9810010210412345678BarMade-up prices. The stop only moves up, to the highest price so far minus 2. Calculated by us on 28 Oct 2026, exact.
A trailing stop climbs with the price and never falls. Here it leaves the trade on bar 8 after the price gave back 2 points from its high.

The trailing stop, with numbers

With a trail of 2 points, the stop starts at 98 and moves up as new highs are made. On the made-up path the high reaches 105, so the stop reaches 103. On bar 8 the price is 102.8, at or below the stop of 103.0, and the trade ends, locking in about $300 on 100 units bought at 100, if it fills at the stop. A fill at the bar price of 102.8 gives $280. A tighter trail would have left earlier, and a wider trail later. There is no setting that is right in every market: too tight is stopped out by noise, and too wide gives back most of the move.

Where bots go wrong with stops

  • Assuming the stop is the loss. The planned loss is the best case. Gaps, thin markets and news widen it, so size positions on the worst plausible fill. See slippage.
  • Placing stops inside the noise. A stop closer than the usual swing is hit often, and each exit pays the spread.
  • No stop at all. A bot that adds to a loser with no stop is a martingale, with a bankroll limit.
  • Testing with perfect fills. A backtest that fills every stop at the exact stop price is too kind, as in backtesting.
  • Stops that hunt the same level. Many traders place stops at round numbers, and thin markets can run through them. Check how your data and broker handle it.

How to check your stops

Take the worst gap in your data and apply it to the stop. Compare the loss with the planned one, then ask whether the account survives it. The stop loss calculator works out the stop price and the planned loss, and the position size calculator sizes the trade so the planned loss fits your risk.

What this page does not tell you

It does not say where to put a stop or which kind to use. The prices are made up, order rules differ by broker, and this is education, not advice.

FAQ

Frequently Asked Questions

What is a stop loss order?

An order that closes a position when the price reaches a set stop price. It limits the planned loss, but does not fix the price you exit at.

What is the difference between a stop loss and a stop limit order?

A stop loss (stop market) order becomes a market order at the stop price and nearly always fills. A stop limit becomes a limit order, so it will not fill below its limit and may not fill at all in a fast fall.

What is a trailing stop?

A stop that follows the highest price by a fixed distance or percent and only moves in your favour, so it can lock in profit while giving the trade room.

Can a stop loss lose more than planned?

Yes. A gap, a thin market or a fast move can fill a stop worse than its price. Size positions for the worst plausible fill.

Should a trading bot use a stop loss?

Almost always, but the type, the distance and the sizing need testing with realistic fills. A bot without a stop that adds to losers is exposed to a single large loss.

Are the numbers on this page real?

Example numbers are made up to show how the maths works, and the page says so. A figure only counts as exact when the page says it was calculated on a stated date. Nothing you enter in a calculator leaves your browser.

Can I use this to decide whether to run a bot?

It can show whether a bot's numbers hold together and how much an account can lose. It cannot say what the market will do, and it is not advice. Use it to ask better questions, then read the terms of your own broker or exchange.

Is this financial advice?

No. It is general education about order types. The prices are made up and it does not consider your situation.

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