Stop Loss Orders: Which Order Type to Use?

By NinjaTrader


Stop loss orders can help to protect trading capital by closing a position when the market turns unfavorable. There are three distinct order types used when implementing stop loss orders into your trading as a risk management technique.

Stop loss refers to a category of orders, not one specific order type. Understanding both basic and advanced order types will help you determine which type of stop loss order to use in each particular situation.

Types of Stop Loss Orders

There are three main order types used for stop loss orders:

  • Stop Market Order – A stop market order is a basic order type which issues a market order once a specified price has been reached, known as the stop price. Once the stop price has been touched or surpassed, the stop market order becomes a market order and will execute at the best possible price. Keep in mind that in fast moving markets, the best possible price might be much different than expected.
  • Stop Limit Order – A stop limit order is similar to a stop market order, except that when the stop price is touched or surpassed, a limit order is issued. This gives you more control of where the order will execute but on the other hand, does not guarantee a fill.
  • Trailing Stop – A trailing stop is a dynamic stop loss order which “trails” behind the price if it moves in your favor. Trailing stops can only move in one direction. For example, once a trailing stop has moved up, it cannot move back down. In this way, trailing stops are not just for preventing losses, but can be used to lock in profits for favorable trades.

Advanced Trade Management

With NinjaTrader’s Advanced Trade Management functionality, traders can predefine both stop loss and profit targets which are automatically submitted when a position is initiated. These orders are linked by OCO, or one-cancels-other, and if a stop loss is hit, the corresponding profit target is cancelled.

ATM strategies greatly reduce the order entry steps required to protect or “bracket” a position by automatically submitting all exit orders within moments of entering the market.

ATM strategies can be configured to use either stop market or stop limit orders for stop losses, and also trailing stops by way of a custom stop strategy. The Auto Trail feature within the custom stop strategy menu is used to create both simple and complex trailing stops, which can be saved within an ATM strategy template.

Learn more about NinjaTrader’s ATM Strategies in this short video overview:


There are no set rules on what types of stop loss orders to use or at which levels to set them, so this will depend on your specific trading style and methodology.

NinjaTrader’s award-winning trading software provides traders with multiple options for order entry including the Basic Entry, SuperDOM and Chart Trader interfaces. Get started with our free trading platform for unlimited use of advanced trading charts and trade simulation.