Stop orders benefit investors by allowing them to trade without having to constantly monitor market movements. It is particularly of use in fast-moving markets, where investors may not be able to react quickly enough to limit losses arising from trading positions.

Stop orders are used when an investor wants to execute an order at a specific price, but the market is not currently trading at that price. They are useful for breakout trades where an investor wants his order executed only if the market trades past a particular price.

Stop orders can be used to:

Minimise a loss or protect a profit on an existing long or short position. Stop orders are generally used as protection against runaway prices. For instance, in a falling market, an investor who is long a particular counter may want to enter a stop sell order which will likely limit the losses faced as a result of such decline. Similarly, in a rising market, an investor who is short a particular counter may enter a stop buy order to limit the losses faced in covering the short position.

Initiate a new long or short position