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Stop Loss

A stop loss is a risk management tool used in trading that involves setting a predetermined price at which a trade will be closed. This is done in order to protect against further losses if the market moves against the position.

In a stop loss order, a trader will specify a price at which they would like their trade to be closed. If the market reaches this price, the order is triggered and the trade is automatically closed out at the best available price. This helps to limit the trader's potential losses by exiting the position before further losses are incurred.

Stop loss orders are commonly used by traders to manage their risk, particularly in volatile markets where prices can quickly move against their positions. By setting a stop loss order, traders can minimize their potential losses and preserve their capital for future trades.

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