Stop Loss Order

Investing

A stop loss order triggers a market order to sell when a security falls to a specified stop price. Used to limit downside on a long position. Example: bought XYZ at $50, set stop loss at $45 — if XYZ trades at $45 or below, your shares sell at the next market price. Risks: fast-falling stocks can gap below the stop, executing at much lower prices; volatile stocks can trigger stops on temporary dips before recovering. Stop-limit orders combine stop trigger with limit price for downside protection — but may not execute in fast crashes. Best for active traders; long-term investors generally shouldn't use stops on broad index ETFs.