What is a stop-loss order?
A stop-loss is an order you place in advance: "If the stock falls to 90, sell." It sits waiting and is only triggered if the price reaches your level. The purpose is to cap how much you can lose without having to watch the screen yourself. It does not guarantee the price, though: when triggered, it usually becomes a market order, and on a day of big falls you can be sold well below the 90.
How it works
You bought at 100 and place a stop-loss at 90. The stock drifts down slowly and hits 90. The order is triggered, and the stock is sold at around 90. You lost 10% — no more. That was the intention.
But: the stock reports bad results before the exchange opens. The first trade next morning is at 75. Your stop-loss triggers at 90, but there is no trade at 90 — it sells at 75. You lost 25%. A stop-loss protects against slow declines, not against gaps. A stop-limit lets you set a floor — but then you risk not being sold at all.
Why it often misfires
Stocks swing. A healthy stock can easily fall 10% in a turbulent week and be back the month after. With a 10% stop-loss you are sold out at the bottom — and then have to decide whether to buy back at a higher price, plus commission twice. Many long-term investors therefore do not use stop-losses on broad funds and large companies: the swings are precisely what you are supposed to sit through.
When it makes sense
- When you hold one turbulent stock you know you cannot bear to watch fall 40%.
- When you are leveraged (then it is necessary — and usually a sign you should not have leveraged).
- When you are away from the market for a long time and cannot follow it.
Do not set it too tight. 5% is triggered by ordinary noise. 15–25% below the purchase price is more typical among those who use it.
The typical beginner's mistake
Setting a stop-loss 5% below the purchase price on a stock that normally swings 3% a day. It triggers within a week on pure noise, you sell at a small loss and watch the stock rise afterwards. A stop-loss must sit outside the stock's normal range — otherwise it is just an expensive way to sell.
How you see it in Kiggo
Kiggo does not trade and cannot place stop-loss orders — you do that in your bank's trading window. But Kiggo's short-term ring shows how much the stock normally swings, and that is exactly the figure you need before choosing where a stop-loss should sit. Under 52-week range you see the year's lowest and highest price.
Related terms
Frequently asked questions
Does a stop-loss guarantee I lose no more?
No. It triggers at your level but sells at whatever price there is. If the price gaps past your level — say after bad news overnight — it sells lower. Only a stop-limit sets a floor, and then you are not sure of being sold.
What is a trailing stop?
A stop-loss that follows the price up. Set it 10% below, and if the stock rises from 100 to 150, the level moves automatically to 135. If the stock then falls 10% from the top, it sells. It locks in gains, but is still hit by ordinary swings.
Should I have a stop-loss on my ETF?
Most long-term investors do not. A broad fund falls with the market and recovers with the market — a stop-loss sells you out at the bottom and forces you to time the re-entry. It is rarely a good trade.
Kiggo explains — Kiggo does not advise. We never tell you what to buy or sell, and key figures can only be compared between companies in the same industry. The decision is yours. Last updated 2026-09-23.
Written by Claus Frisch, founder of Kiggo. Not an adviser, not a bank — Kiggo explains, you decide.
