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Hard stop

A stop order actually resting at the broker, so the exit happens whether or not you are watching the screen.

A hard stop is an instruction sitting in the market. Once placed, it executes without you: no hesitation, no renegotiation, no waiting for one more candle.

The trade-off is honest and worth stating. A resting stop guarantees the exit is attempted but not the price - a stop-order becomes a market order when triggered, so in a fast tape you get whatever is there, which is what stop-slippage measures. It is also visible to the exchange, which fuels the perennial stop-hunt complaint. In liquid instruments the visibility argument is mostly folklore; in thin small caps and off-hours futures it is not.

For anyone who has ever widened a stop in the moment, the hard stop is the correct default. The discipline cost of a mental-stop is paid in the exact trades you cannot afford, because those are the ones where the temptation to wait is strongest.

Related: mental-stop, stop-slippage, catastrophic-stop, stop-distance

See it drawn

Original diagrams for the ideas on this page. Illustrative, not real market data.

Slippage on a market orderA buy order clears four price levels, so the average price paid is worse than the price first quoted.Buy 1,000 shares at marketpricesell orders resting (bar length = size)20.04300 shares20.03200 shares20.01200 shares20.00300 sharesnothing resting at 20.02order sweeps up the bookaverage fill 20.02SLIPPAGE0.02 a share$20.00 in totalintended 20.00Each level fills at its own price; the average is what you really paid.
Slippage on a market order. You click at 20.00, but only 300 shares are resting there, so the rest of the order fills at 20.01, 20.03 and 20.04. The average price paid is 20.02, and that two-cent gap is slippage.

Educational only, not advice. Spotted an error? Post in Site Feedback.