Stop-loss order


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Related to Stop-loss order: Trailing Stop Loss Order, Trailing Stop 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 ?
11 attacks, stop-loss orders were last used during Operation Allied Force, the air war over Kosovo.
If the stock keeps moving up, you can keep increasing your stop-loss order.
The number of soldiers who have received stop-loss orders is unclear.
Later that same day, when it appeared that the dollar would not move any higher, dealers began to take profits on long-dollar positions, triggering stop-loss orders, and a sudden decline in the dollar ensured.
This kind of market demands that short-term traders use properly set stop-loss orders," McKinley said.
Another effective way to minimize your potential downsides is to employ stop-loss orders on every trade.
Stop-loss orders are activated on a daily close breaching the specified price level.
Yuichiro Harada, a senior vice president of Mizuho Corporate Bank's forex division, said there were stop-loss orders at the mid-116 yen level that capped the dollar's gains.
On the downside, speculators were happy to lock in profits which caused the market to fall and in turn trigger stop-loss orders.
So far the military has issued no stop-loss orders (which prevent service members from separating from the armed forces under certain conditions) that would suspend discharges based on "don't ask, don't tell.
90 yen as buying by foreign short-term funds triggered stop-loss orders, but the dollar is unlikely to break the 116 yen line Friday as Japanese importers' sell orders are lined up above 115.