Stop-loss order

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Related to Stop Losses: Trailing Stop Order, Trailing Stops

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 ?
Guaranteed stop losses are especially useful in volatile markets when prices can move suddenly and significantly, and may not hit the exact level that you set your stop loss.
Example 2 It's worth noting that stop losses are not guaranteed.
Standard stop losses are useful tools in helping traders manage the risks of spread betting in a volatile market.
It is important remember that standard stop losses are not infallible: the order will close each trade at the best available price once the stop value has been triggered.
Ultimately, whether you opt for standard stop losses or pay the additional premium to apply guaranteed stop losses, the most important thing is that you always use one or the other to limit the downside risk of your financial spread bets.
It is for this reason that you should keep stop losses at the cornerstone of your spread betting risk management.
com/spread-betting-iphone-app/) - guaranteed stop losses are more advisable.