Setting a stop loss order on Robinhood

A stop loss order is an instruction to sell a stock automatically when its price drops to a level you choose. On Robinhood, you set this up by opening the stock you own, tapping the sell button, and selecting "Stop Loss" as your order type instead of a market or limit order. You then enter the price at which you want the sale to trigger, review the order, and confirm it. The order stays active until the stock hits that price, you cancel it, or the market closes for the day.

Stop loss orders are meant to limit how much money you can lose on a single position. If you buy a stock at $50 and set a stop loss at $45, the order will sell your shares if the price falls to $45 or below. You won't have to watch the stock all day — the order executes automatically. This is useful if you own a stock but want protection against a sudden drop, or if you're away from your phone and can't sell manually.

Key Takeaways

  • Stop loss orders on Robinhood trigger a sale when the stock price reaches or falls below the price you set, but they are not may provide to execute at that exact price.
  • You place a stop loss by selecting the stock, tapping sell, choosing "Stop Loss" as the order type, and entering your stop price.
  • Stop loss orders expire at the end of the trading day if they have not triggered, so you must renew them each day if you want ongoing protection.
  • A stop loss can sell your shares at a price lower than your stop price if the stock gaps down or drops very quickly, leaving you with a larger loss than expected.
  • You can cancel a stop loss order at any time before it triggers by opening the order details and selecting cancel.

The difference between stop loss and stop limit orders

Robinhood offers two types of stop orders: stop loss and stop limit. A stop loss order becomes a market order once the stock hits your stop price, meaning it will sell at whatever price the market is offering at that moment. A stop limit order becomes a limit order instead, meaning it will only sell if the price is at or above a second price you set (the limit price).

The trade-off is protection versus certainty. A stop loss guarantees your shares will sell once the price drops to your stop, but you might get less money than you expected if the stock is falling fast. A stop limit guarantees you won't sell below your limit price, but if the stock drops through both prices very quickly, your order may not execute at all and you'll be stuck holding the shares as they continue to fall.

For most people protecting against a sudden drop, a stop loss order is simpler and more reliable. Use stop limit only if you have a specific price floor below which you absolutely will not sell.

How to place a stop loss order step by step

Step 1: Open the stock you own. Tap the stock name or ticker in your Robinhood portfolio to open its detail page.

Step 2: Tap the sell button. This is usually at the bottom of the screen or in the top right corner, depending on your app version.

Step 3: Select "Stop Loss" as your order type. You'll see options like "Market," "Limit," and "Stop Loss." Tap "Stop Loss."

Step 4: Enter the stop price. This is the price at which you want the sale to trigger. If you own 100 shares and want to limit your loss, enter a price below your purchase price.

Step 5: Review the order details. Robinhood will show you the number of shares, the stop price, and an estimate of how much you'll receive. Check that everything is correct.

Step 6: Confirm the order. Tap "Place Order" or "Confirm" to submit it. The order is now active and will trigger if the stock price reaches your stop price during market hours.

When stop loss orders trigger and when they don't

A stop loss order triggers during regular market hours (9:30 a.m. to 4 p.m. Eastern time on weekdays when the market is open). If the stock price reaches or falls below your stop price at any point during the day, the order converts to a market sell order and executes at the next available price. You do not have to be watching your phone — the order works automatically.

Stop loss orders do not carry over to the next trading day. If the stock doesn't hit your stop price by the time the market closes, the order expires and is canceled. You'll need to place a new stop loss order the next day if you still want that protection. This is different from some other brokers, where you can set orders to last for weeks or months.

Stop loss orders also do not work during after-hours trading (4 p.m. to 8 p.m. Eastern) or before-hours trading (4 a.m. to 9:30 a.m. Eastern). If a stock drops sharply in after-hours trading, your stop loss order won't trigger until the next regular market open.

The gap-down risk: when you sell for less than your stop price

One important limitation of stop loss orders is that they don't may provide you'll sell at your stop price. If a stock opens the day significantly lower than the previous close — a situation called a gap down — your stop loss order will trigger, but you may sell at a price well below your stop price. This happens because once the stock hits your stop price, the order becomes a market order and sells at whatever price is available, which may be much lower if the stock is falling quickly.

For example, if you own a stock trading at $50 and set a stop loss at $45, but the stock opens the next day at $40 due to bad news, your order will trigger and sell your shares at or near $40, not $45. You've lost $10 per share instead of the $5 you were trying to limit yourself to.

This risk is real but not common in most stocks. It happens most often with smaller companies, stocks that react to overnight news, or during market-wide drops. If you're concerned about gap-down risk, a stop limit order can protect you, though it carries the risk that your order won't execute at all.

Canceling or adjusting a stop loss order

You can cancel a stop loss order at any time before it triggers. Open your Robinhood app, go to the "Orders" or "Activity" tab, find the stop loss order you want to cancel, and tap "Cancel Order." The order is immediately removed and your shares remain in your account unsold.

Robinhood does not allow you to edit a stop loss order after you've placed it. If you want to change the stop price, you must cancel the existing order and place a new one. This takes only a few seconds, but it means you have a brief window where you have no stop loss protection. If you're changing the stop price to a lower level (to reduce your loss limit), this is usually not a problem. If you're changing it to a higher level, consider whether you want to place the new order immediately or wait for a better moment.

Common mistakes to avoid

The most common mistake is forgetting that stop loss orders expire at the end of each trading day. If you place a stop loss on Monday and the stock doesn't hit it, the order is gone on Tuesday morning. You have to place it again. Many people think they have ongoing protection when they don't.

Another mistake is setting the stop price too close to the current price. If you buy at $50 and set a stop at $49, a normal daily fluctuation could trigger the order and sell you out of a stock you wanted to hold. Most traders set stops at least 5 to 10 percent below their purchase price, depending on how volatile the stock is.

A third mistake is using stop loss orders as a substitute for research. A stop loss can limit your loss, but it doesn't prevent you from buying a bad stock in the first place. It's a tool for managing risk on positions you've already taken, not a way to avoid making poor decisions.

Frequently Asked Questions

Can I set a stop loss order during after-hours trading?

No. Stop loss orders on Robinhood only work during regular market hours (9:30 a.m. to 4 p.m. Eastern). You can place the order during after-hours, but it won't trigger until the next regular market open. If the stock drops sharply after hours, you won't be protected until 9:30 a.m.

What happens if my stop loss order triggers but I don't have enough buying power to cover any fees?

Robinhood does not charge fees for stock trades, so there are no fees to cover. Your stop loss order will execute and sell your shares. The proceeds go into your account as cash.

Can I place a stop loss order on a stock I don't own yet?

No. You can only place a stop loss order on shares you already own. If you want to sell a stock you don't own (a short sale), Robinhood has different rules and order types that apply.

If my stop loss triggers and sells my shares, can I buy them back immediately?

Yes. Once your shares are sold, the cash is in your account and you can use it to buy any stock, including the same one you just sold. There are no restrictions on buying back a stock after a stop loss triggers, though you should be aware that you've locked in a loss and are starting a new position.

Do stop loss orders work on fractional shares?

Yes. If you own fractional shares on Robinhood, you can place a stop loss order on them just as you would on whole shares. The order will trigger and sell all your shares (whole and fractional) at the market price once your stop price is reached.