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.