Stop Loss
An order to automatically close a position at a specified price to limit potential losses.
Definition
A stop loss is an order placed to automatically close a position when price reaches a specified level, limiting potential losses. It's a crucial risk management tool that protects traders from excessive losses.
How It Works
- Set below entry for long positions
- Set above entry for short positions
- Triggered when price touches the level
- Market order executed at next available price
Types of Stop Loss
Fixed Stop Loss
Set at a specific price level
Trailing Stop
Moves with price to lock in profits
Guaranteed Stop
Executes exactly at set price (may have fee)
Trading Tips
1
Never trade without a stop loss
2
Place beyond key support/resistance levels
3
Slippage can occur in volatile markets
Related Terms
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