Stop-Loss Order
In short
An order to sell when price drops to a specified level — limits your downside
A stop-loss is a standing order that says 'if this stock drops to $X, sell it automatically.' It's your safety net — it limits how much you can lose on any single position. Set it when you buy, and if the market turns against you, the stop-loss fires before things get worse.
A stop-loss order becomes a market order when the stop price is reached. For long positions, the stop must be below the current price. Unlike trailing stops (which move with the price), a fixed stop-loss stays at the level you set. The platform validates that SL < current price for longs and SL > current price for shorts before accepting the order.
Formula
Max Loss = Entry Price - Stop PriceRelated concepts
- Trailing Stop — A trailing stop follows your stock's price upward. If the stock rises from $100 to $150, a 15% trailing stop moves from $85 to $127.50. If the price then drops to $127.50, it triggers a sell — locking in a $27.50 profit instead of riding it back down. The stop only moves UP, never down.
- Stop Order — A stop order is your automatic exit. Set a stop at $45 on a $50 stock — if it falls to $45, your order triggers and sells at market price. It protects you from bigger losses but can fill below $45 in a fast-moving market.
- Risk Tolerance — Risk tolerance is how well you can sleep when your portfolio drops 30%. Some investors can stay the course; others panic-sell. High risk tolerance = more stocks. Low risk tolerance = more bonds and defensive assets.
- Take-Profit Order — A take-profit order is the opposite of a stop-loss: it automatically sells when the price reaches your target level. If you buy at $100 and set a take-profit at $130, the platform sells for you when the price hits $130 — no need to watch the screen all day.