Stop-loss order

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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 and Stop Loss orders are used by investors to protect their downside when they trade.
The dramatic drop sliced through massive stop loss orders and the market simply had no buyers.
The market was offered throughout Friday with stop loss orders being triggered at $7,700, $7,600 and $7,500 to a low of $7,470.
If you choose to trade the markets following the re-election of President Obama, ensure you only invest what you can afford to lose and use stop loss orders.
Fast computers are now in control, with stop loss orders automatically executed in a matter of microseconds.
The intraday dive dragged the stock market through several support levels and undoubtedly touched off massive stop loss orders.  The dramatic moves also likely triggered large buy and sell orders from automated trading programs.
Traders were taken by surprise with the sudden selling pressure in turn triggering stop loss orders. Though Friday's market improved slightly to close $12 down over the week at $541 it is hard to feel too positive over this much neglected metal.
Zinc: Having hit a low of $1032 on Monday, the three months price managed a good bounce which on passing the $1050 level on Wednesday triggered stop loss orders leading to what was to be the week's high of $1072 that day.