Order Type

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

Never trade without a stop loss

Place beyond key support/resistance levels

Slippage can occur in volatile markets

Related Terms

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