What Is Stop-Loss Order? Meaning & Example
Definition
A stop-loss is an order that closes a position automatically if price moves against you to a set level. It helps limit losses, though fast markets can cause fills worse than the stop price.
Related terms
A take-profit order closes a position automatically once price reaches a target level. It locks in gains without needing to watch the market constantly.
Trailing StopA trailing stop is a stop-loss that moves in your favor as price moves in your favor, staying a set distance behind. It helps protect gains while letting winners run.
Risk-Reward RatioThe risk-reward ratio compares how much you could lose on a trade with how much you could gain. Many traders look for setups where potential reward is at least twice the risk.
What is Stop-Loss Order?
A stop-loss is an order that closes a position automatically if price moves against you to a set level. It helps limit losses, though fast markets can cause fills worse than the stop price.
Can you give an example of Stop-Loss Order?
Buying at $50 with a stop-loss at $46 caps your planned loss at about $4 per share.