Orders & ExecutionStop Sell
Sell Stop
A pending order to sell placed below the current market price, triggered when the bid reaches that level.
What Sell Stop means
A sell stop is the mirror image of a buy stop and is always placed below the prevailing market price. It waits until the bid trades down to the specified level and is then released as a market order to sell. The typical use is a downside breakout entry: a trader who believes a break of support will accelerate places the sell stop just beneath the level, so the position is only opened if the market confirms the thesis by trading there.
The same order type does duty as the protective exit on a long position, since closing a long means selling. Every stop loss under a long trade is, mechanically, a sell stop. This concentration is why liquidity pools form beneath visible swing lows and round numbers, and why a break of such a level can produce a rapid extension as resting sell stops are converted to market orders in sequence.
As with all stop orders, the trigger price is not the fill price. Downside breaks tend to be faster than upside ones in risk-off conditions, so negative slippage on sell stops is common around data releases and at the weekly open. Brokers also apply a minimum distance rule, so a sell stop cannot normally be placed within a few points of the current bid.
Worked example
With GBP/USD at 1.2700 and support at 1.2650, a trader places a sell stop at 1.2645; if the bid reaches that level the order is released and might fill at 1.2643 in fast conditions.
Related terms
- Buy StopA pending order to buy placed above the current market price, triggered when the ask reaches that level.
- Sell LimitA pending order to sell placed above the current market price, filled at that price or better.
- Stop OrderAn order that converts into a market order once price trades through a specified trigger level.
- Pending OrderAn instruction to open a position at a future price level, held by the broker until triggered or cancelled.
- SupportA price area where buying interest has previously been strong enough to halt or reverse a decline.
Frequently asked questions
What does Sell Stop mean in forex trading?
A pending order to sell placed below the current market price, triggered when the bid reaches that level.
How does Sell Stop work in practice?
The same order type does duty as the protective exit on a long position, since closing a long means selling. Every stop loss under a long trade is, mechanically, a sell stop. This concentration is why liquidity pools form beneath visible swing lows and round numbers, and why a break of such a level can produce a rapid extension as resting sell stops are converted to market orders in sequence.
What is an example of Sell Stop?
With GBP/USD at 1.2700 and support at 1.2650, a trader places a sell stop at 1.2645; if the bid reaches that level the order is released and might fill at 1.2643 in fast conditions.
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