Stop-loss order

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Related to Stop Loss Order: Limit order, Trailing Stop Loss Order

Stop-loss order

An order to unwind a position when the price moves against you. This order is designed to limit losses or in some cases to lock in a certain level of profit. As soon as the price of the security hits the stop-loss price (or falls below), the order becomes a market order. If you were short the asset, the stop-loss would trigger a purchase. Stop-losses are often disabled for after hours trading because prices are often quite variable and you could be executed at an unfavorable price. Stop losses are also usually calculated off the bid price (which is a measure of what people are actually willing to pay if the security is sold). Again, one needs to be careful because if there is lack of liquidity, the bid-ask spread could be large and you could be stopped out at an unfavorable price. Finally, some traders have rolling or trailing stop loss. As the price moves up the stop-loss is moved higher (say 20% below the current price).

Stop-Loss Order

An order to a broker to buy or sell a security at the best available price once a certain, stated price is reached. Suppose that price is $50. A stop order remains inactive until that security begins trading at $50, at which point the broker may fill the order at best price he/she is able to find. A stop-loss order is technically the same as a stop order, but carries the connotation of avoiding further losses rather than seeking to cash in on future gains. See also: Protective stop.
References in periodicals archive ?
Please remember that due to market movement, stop loss orders may be executed at prices worse than the requested price and result in losses larger than desired.
The Limited Risk Account offers peace of mind in that every trade you place has a Guaranteed Stop Loss Order applied, limiting your potential losses.
Using a Guaranteed Stop Loss Order is the most effective form of managing risk and limiting losses.
A guaranteed stop loss order offers an additional level of certainty when managing your downside risk.
Guaranteed Stop Loss Order Example: In this example, let's say you want to 'go long' and buy following some positive news regarding the price of your chosen market - UK 100.
As mentioned above, when traders act on impulse, they can forget to consider crucial risk management tools such as their stop loss orders.
The final two rules are imperative to managing your risk; these rules will affect where you place your limit orders and most importantly, your stop loss orders.
Working in the same way as Standard Stop Loss Orders, GSLOs guarantee to close your trade at the trigger value, i.
You can choose between a Standard and Guaranteed stop loss order ; with the latter offering the greatest protection, specifically if gapping occurs in your chosen market.
A Guaranteed Stop Loss Order will ensure that the trade closes at the stop loss level determined, regardless of any market gapping, although a small fee is charged for this added protection.
You can use a Guaranteed Stop Loss Order to ensure that should Rio Tinto reach 3500p, our systems will automatically close out your trade at this level, to prevent you from incurring any further losses.
The setting of a stop loss order is extremely important in Forex trading as volatility and price fluctuations can be significant on a daily basis.