The simple definition of a ‘stop’ order is that it is an order to buy or sell at a less advantageous price than is currently available in the market. The obvious question is why anyone would want to do this?
The answer is that ‘stop’ orders are used to limit an investor’s exposure in the market. Traders place ‘stop’ orders to protect themselves from adverse market moves. This should always be a part of a trading plan. In other words, a trader should know in advance of placing a trade where to close it should the market move against him or her. More often than not, prices will move against you at some stage.
Sometimes this may just be a minor short-term move, but at other times it may mean that you’ve got the market direction wrong. So the aim is to work out the best place to put your stop to give you the best opportunity to make money while taking the smallest amount of acceptable risk.
source that may can help to know more: https://trademoneta.com/learn-to-trade/trading-academy/https://trademoneta.com/learn-to-trade/trading-academy/