What is a stop-loss order — and how can you use one? | finder.com
stop-loss order money transfers

What is a stop-loss order?

We value our editorial independence, basing our comparison results, content and reviews on objective analysis without bias. But we may receive compensation when you click links on our site. Learn more about how we make money.

A stop-loss order could help you avoid big losses on your currency investments.

The exchange rate between a currency pair can change suddenly. These fluctuations could transform a good investment into a poor one — and quickly too.

To avoid losing too much on your investments, especially in volatile markets, consider a stop-loss order.

What is a stop-loss order?

A stop-loss order is a “hedging” tool. When you place a stop-loss order, your brokerage will buy or sell a currency at a price that you specify.

For example, if you currently hold the USD/JPY currency pair and the price is USD/JPY = 100 (meaning $1 buys 100 yen), you might put in a stop-loss order to sell at USD/JPY = 98. This means that once the exchange rate hits 1 USD = 98 JPY, your brokerage will automatically sell your holding.

Why is a stop-loss order useful?

A stop-loss order is used to limit your losses. If you buy a currency holding and place a stop-loss order 5% below the price at which you made the purchase, then the most you can lose on your investment is 5%.

Stop-loss orders: An example

We’ve already gone over examples of using stop-loss orders to sell currency. Here’s an example for using a stop-loss order to buy currency.

A common strategy in forex trading is shorting currency. Basically, that means you’re hoping a currency will decrease in value. For example, let’s say $1 buys 100 yen right now, but you think the dollar will go down against the yen.

In this case, you could sell the dollar for yen immediately, hoping to sell the yen back to dollars at a favorable exchange rate — say, USD/JPY = 98.

But what if something happens in the world and the exchange rate shoots to USD/JPY = 115? You have a lot of yen on your hands, but you’d take a big loss if you sold it back for dollars.

To prevent this, you can place a stop-loss order to sell your yen for dollars at more advantageous price — say, USD/JPY = 102. This means that if the price of the currency pair moves against you, at least you won’t lose your shirt from shorting the pair.

Compare providers that can help you set up stop-loss orders

I want to send

to

Min. Transfer Amount Transfer Speed Online Transfer Fee Rate Amount Received Description CTA Details
USD 150 1 day USD 0.00 18.705 MXN 93,523 Send safe, no-limit transfers with no fees and competitive exchange rates. Go to site Show details
$1 3 - 5 days USD 1.00 18.892 MXN 94,439 Enjoy high maximum transfers into more than 20 currencies while saving up to 90% over local banks. Go to site Show details
$2,000 3 - 5 days USD 0.00 18.827 MXN 94,137 No-limit transfers with competitive exchange rates for 100+ currencies. Go to site Show details

Compare up to 4 providers

I want to send

to

Min. Transfer Amount Transfer Speed Online Transfer Fee Rate Amount Received Description CTA Details
$0 3 - 5 days USD 0.00 18.667 MXN 93,334 Transfer up to $500,000 with no minimums and no fees. Go to site Show details
USD 1,000 1 day USD 0.00 18.761 MXN 93,806 Exclusive offer: $0 transfer fee
No-limit transfers with competitive exchange rates for 100+ currencies.
Go to site Show details
USD 1 Within an hour USD 3.99 18.723 MXN 93,543 Use promo code FINDER to send your first transfer at no fee to 110+ countries for bank-to-bank deposit, cash pickup or mobile top-up. Go to site Show details
USD 1 3 - 5 days USD 75.00 18.894 MXN
93,050
Enjoy high maximum transfers into more than 20 currencies while saving up to 90% over local banks. Go to site Show details
USD 20 Same day - - Send your first transfer for free with code NOFEEFINDER Go to site Show details

Compare up to 4 providers

Are there any drawbacks?

Though the stop-loss order is nice in theory, in practice it doesn’t always work perfectly. Your stop-loss order could be triggered at a certain price, but you may not actually get that price — instead, your order will be fulfilled at the next available price. That’s because when you’re trading currency, there needs to be someone else trading with you.

In fast-moving markets, the next available price means that you may end up losing more than you originally thought you would.

What else should I know?

Some traders recommend that instead of setting stop-loss orders, you should set up price alerts. This way you can decide for yourself what to do next, rather than trigger buying or selling your currency automatically.

Frequently asked questions

Was this content helpful to you? No  Yes

Ask an Expert

You are about to post a question on finder.com:

  • Do not enter personal information (eg. surname, phone number, bank details) as your question will be made public
  • finder.com is a financial comparison and information service, not a bank or product provider
  • We cannot provide you with personal advice or recommendations
  • Your answer might already be waiting – check previous questions below to see if yours has already been asked

Finder only provides general advice and factual information, so consider your own circumstances, or seek advice before you decide to act on our content. By submitting a question, you're accepting our and .

US International Money Transfers Offers

Important Information*
XE International Money Transfers

With global payments provider XE, enjoy fast and secure transfers and a range of foreign currency tools and calculators, while benefiting from $0 transfer fees.

WorldRemit International Money Transfers

Use promo code FINDER to send your first transfer at no fee to 110+ countries for bank-to-bank deposit, cash pickup or mobile top-up.

World First Foreign Exchange

Exclusive offer: $0 transfer fee
No-limit transfers with competitive exchange rates for 100+ currencies.

TransferWise International Money Transfers

Enjoy high maximum transfers into more than 20 currencies while saving up to 90% over local banks.

Go to site