A stop order, similar to a limit order, allows you to specify the quantity of the asset to trade at a certain price. Contrary to limit orders, stop orders allow you to sell lower than the current price and buy higher than the current price.

Stop buy orders must have a trigger price greater than the current price, essentially meaning you are waiting for the price to go up and show confidence in the asset before buying. These order types are commonly used when buying breakouts.

Stop sell orders must have a trigger price lower than the current price, essentially meaning if your trade doesn't work in your favour and the price drops, you can exit the position without losing too much. These order types are also referred to as stop loss orders and are not commonly used by HODLERS. It is a strongly recommended practice to always manage risk on ANY trades using stop loss orders.

An example would be if you wanted to purchase 1 Bitcoin and the price is currently $10,000 AUD and you expect it to run up to $15,000. In this case you may wish to limit your losses if you are wrong to say $1000, in which case you would set a stop loss order at $9000 AUD/BTC. This means, if Bitcoin was to drop to $9000 the position would be sold. This would be especially advantageous if the price continued to drop to 8k or even 7k, when you could consider re-entering a new trade.

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