protective stop

Protective Stop

A strategy that aims to limit potential losses to a desired amount by using a stop-loss or stop-limit order.

Notes:

For example, a trader or investor may execute a protective stop by setting a stop-loss order for 10% below what he or she paid for the stock, therefore limiting the loss to 10%.

See also: Above the Market, Below the Market, Limit Order, Market Order, Stop-Limit Order, Stop-Loss Order, Stop Order

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protective stop

A stop order that protects gains or limits losses of an existing investment position.