A Robinhood stop loss is a sell stop order that activates when a stock reaches your chosen stop price. As of, the process for placing one has seven steps:
- Open the security's detail page.
- Tap Trade, then choose Sell.
- Select Order type and choose Stop order.
- Enter the number of shares.
- Enter your stop price.
- Choose the time in force, such as Good-for-Day or Good-Til-Canceled.
- Review the order and submit it.
Robinhood's order menu also includes stop limit orders and trailing stop orders for eligible stocks and ETFs.
Example of a Robinhood Stop-Loss Order
Suppose you own 10 shares of a stock trading at $50 and want to sell if it falls 10%.
- Current price: $50
- Stop-loss percentage: 10%
- Stop price: $45
- Quantity: 10 shares
- Order type: Sell stop
If the stock reaches $45 or lower, Robinhood converts the stop order into a market order and attempts to sell the shares at the best available price. The final sale price may be lower than $45, especially during fast markets or a price gap.
Stop Order vs. Stop Limit Order on Robinhood
| Order type | What happens when the stop price is reached | Main advantage | Main risk |
|---|---|---|---|
| Stop order | Becomes a market order | Higher chance of execution | Sale price is not guaranteed |
| Stop limit order | Becomes a limit order | Sets a minimum sale price | May not execute |
| Trailing stop order | Stop price follows the stock as it rises | Can help protect gains automatically | A sharp decline can still result in a poor fill |
A sell stop limit order uses two prices:
- Stop price: Activates the order.
- Limit price: Sets the lowest price you are willing to accept.
For example, a $45 stop price and a $44.75 limit price means the order activates at $45 but will only sell at $44.75 or higher. If the stock falls below $44.75 before the order fills, the position may remain open.
How to Choose the Stop Price
Avoid setting a stop price at an arbitrary percentage without considering the stock's normal price movement. A stop placed too close to the current price may trigger because of ordinary volatility.
Common approaches include:
- Fixed percentage: Set the stop a chosen percentage below the purchase price or current price.
- Support level: Place the stop below a price level where the stock has previously found buyers.
- Risk-based position sizing: Decide how much money you are willing to lose, then calculate the stop price.
For a long position:
Stop price = Entry price - Acceptable loss per share
Example:
- Entry price: $40
- Maximum acceptable loss per share: $4
- Stop price: $36
These are planning examples, not recommendations for a particular stock.
Important Robinhood Stop-Loss Limitations
A Robinhood stock stop order does not guarantee a sale price. When triggered, it becomes a market order and can execute below the stop price during volatility, at market open, or after a price gap.
Robinhood stock stop orders execute during market hours. Check the order's time-in-force setting if you want the order to remain active beyond the current trading day. Robinhood supports Good-for-Day and Good-Til-Canceled settings for eligible equity orders.
A stop limit order provides more price control but does not guarantee execution. If the market moves below the limit price, there may be no buyer willing to purchase the shares at the required price.
Robinhood may reject a stop order that would trigger immediately. For example, a sell stop generally needs to be below the current market price.
How to Cancel or Change a Robinhood Stop Loss
In the Robinhood app:
- Open Account.
- Open History.
- Select the order under Pending.
- Choose Cancel order, or replace it if that option is available.
Robinhood states that pending stop orders can be canceled. Replacement orders generally must use the same order type as the original order.
Stop Losses for Options and Crypto
The stop-loss process depends on the asset:
- Options: Robinhood supports stop market and stop limit orders for eligible options strategies, but stop market orders may have specific entry-time restrictions.
- Crypto: Robinhood supports stop and stop limit orders for crypto. Crypto sell stop orders can include a buffer, so the execution price may differ materially from the stop price.
For a regular stock or ETF position, use a sell stop when execution matters more than receiving a specific minimum price. Use a sell stop limit when price control matters more than the risk of the order not filling.