Yes. A stop-loss limits risk — it doesn't eliminate it. Gaps, slippage, and sudden volatility can all close your position at a price worse than your stop, sometimes much worse.
When do stop-losses fail?
Three things can turn a stop-loss into a loss bigger than you planned for:
Gap risk. Stocks open well below your stop after overnight news or earnings. Your stop triggers at the open price, not your stop price.
Slippage. In fast-moving markets, no buyer exists at your stop level. Your order fills at the next available price.
Premature triggers. Set the stop too tight and normal volatility takes you out of an otherwise profitable trade.
How to use stop-losses properly
Treat the stop as a safeguard, not a guarantee. That means:
Size the position first, then place the stop. Your stop distance determines how many shares you can risk — not the other way around.
Base placement on volatility, not a flat percentage. A 2% stop on a quiet blue-chip is reasonable. A 2% stop on a small-cap mover is noise.
Account for gap risk on overnight holds and earnings. A stop won't protect you from a 15% gap down. Position sizing will.
A stop-loss caps most losses on most days — but not all losses on all days.