Hard Stop

Written By
Paul Tracy
Updated July 16, 2021

What is a Hard Stop?

A hard stop is a standing instruction from a brokerage client to sell units of a security if the market price declines to a specific level. It is a generic term that can refer to both a stop-loss order or a stop order.

How Does a Hard Stop Work?

Securities may experience volatile price fluctuations that exacerbate their levels of risk. Traders and investors place hard stops on specific portfolio holdings in an effort to minimize losses.

For example, suppose Bob wishes to sell off his 100 shares of stock ABC if they reach $50 per share. Bob places a hard stop on these hundred shares by instructing his brokerage house to automatically sell all 100 shares if their price in the stock market falls to $50 per share.

Why Does a Hard Stop Matter?

A hard stop minimizes losses only if a security's market value experiences a sustained decline. A hard stop can result in lost gains if a security’s market price experiences a recovery subsequent to reaching the hard stop price.

Activate your free account to unlock our most valuable savings and money-making tips
  • 100% FREE
  • Exclusive money-making tips before we post them to the live site
  • Weekly insights and analysis from our financial experts
  • Free Report - 25 Ways to Save Hundreds on Your Monthly Expenses
  • Free Report - Eliminate Credit Card Debt with these 10 Simple Tricks
Ask an Expert
All of our content is verified for accuracy by Paul Tracy and our team of certified financial experts. We pride ourselves on quality, research, and transparency, and we value your feedback. Below you'll find answers to some of the most common reader questions about Hard Stop.
Be the first to ask a question

If you have a question about Hard Stop, then please ask Paul.

Ask a question

Paul has been a respected figure in the financial markets for more than two decades. Prior to starting InvestingAnswers, Paul founded and managed one of the most influential investment research firms in America, with more than 3 million monthly readers.

If you have a question about Hard Stop, then please ask Paul.

Ask a question Read more from Paul
Paul Tracy - profile
Ask an Expert about Hard Stop

By submitting this form you agree with our Privacy Policy

Don't Know a Financial Term?
Search our library of 4,000+ terms