Stop-Loss Order

Stop-loss order

An order to unwind a position when the price moves against you. For example, you had purchased a stock, the stop-loss order would be to sell the stock when the price falls to a specified level. If you were short the asset, the stop-loss would trigger a purchase.

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Stop-Loss Order

What Does Stop-Loss Order Mean?

An order placed with a broker to sell a security when it reaches a certain price. It is designed to limit an investor's loss on a security position. A stop order becomes a market order once the stop price has been reached. Also known as a stop order or stop-market order.

Investopedia explains Stop-Loss Order

In other words, setting a stop-loss order for 10% below the price an investor paid for the stock would limit the investor's loss to 10%. It is a good idea to use a stop-loss order before an investor leaves for holidays or enters a situation in which the investor will be unable to watch his or her stocks for an extended period. The downside of a stop order is that since the order becomes a market order when the stop price is hit, instead of a limit order, the investor never knows the price at which the order will be executed.

Related Terms:
• Buy to Cover
• Downtrend
• Market Order
• Stop Order
• Stop-Limit Order