How Does a "Stop-Loss" Order Interact with Gap Risk? ⎊ Path

How Does a “Stop-Loss” Order Interact with Gap Risk?

A standard stop-loss order is an instruction to sell at the market price once a specified trigger price is hit. If a price gap occurs and the market opens below the stop price, the order will execute at the first available price, which may be significantly lower than the stop price.

This results in a larger-than-expected loss. A "stop-limit" order can prevent this, but risks non-execution.

Why Are ‘Stop-Loss’ Market Orders Particularly Susceptible to High Negative Slippage?

How Does a “Stop Limit” Order Combine a TIF Concept with Price Control?

How Does the Concept of “Slippage” Exacerbate Losses during a Liquidation Cascade?

Why Are Stop-Loss Orders Less Reliable in Volatile Markets?

What Is Slippage and How Does It Affect the Execution of a Stop-Loss Order?

How Does a “Stop-Limit Order” Combine the Features of a Stop Order and a Limit Order?

What Happens If a Liquidation Order Is Filled at a Price Worse than the Bankruptcy Price?

What Is the Difference between a Stop-Loss Order and a Stop-Limit Order?

Glossar

Price Gap

Discontinuity ⎊ A price gap represents a technical analysis phenomenon where an asset's price moves sharply between trading periods without any transactions occurring at intermediate levels.