What is stop loss?

Definition of Stop Loss, Stop Loss Meaning - The Economic Times Definition: Stop-loss can be defined as an advance order to sell an asset when it reaches a particular price point. It is used to limit loss or gain in a trade. The concept can be used for short-term as well as long-term trading.

What is a stop-loss order?

Stop-loss orders are orders with instructions to close out a position by buying or selling a security at the market when it reaches a certain price known as the stop price. They are different from stop-limit orders, which are orders to buy or sell at a specific price once the security's price reaches a certain stop price.

What is the difference between a sell-stop and a buy-stop order?

A sell-stop order is a type of stop-loss order that protects long positions by triggering a market sell order if the price falls below a certain level. A buy-stop order is a type of stop-loss order that protects short positions; it is set above the current market price and is triggered if the price rises above that level.

Why is a stop loss order important in the stock market?

Stop loss orders play a crucial role in risk management in the stock market. Using a stop loss strategy, investors and traders can limit their potential losses which reduces the risk of holding a losing position. This helps in maintaining discipline and sticking to investment goals and strategies even in a volatile market condition.