When an investor wants to protect its position in a given stock, he or she can set a sell stop order with a price below the current market price. If the stock price reaches the stop price, a market order is activated, and sold at the best price available
ABCD stock is trading at $10 per share. You, as the investor, understands that if ABCD trades below $5, the stock price could go even lower. Therefore you would like to sell your shares of ABCD when they reach $5. You can set a sell stop order with a stop price of $5, and as soon as the stop price is reached, a market order is activated, and sold at the best price available. If ABCD stock price never reaches $5, your stop order won’t be executed.
Here is the step by step on how to enter a stop order: