Stop-Loss Orders Explained
A 1-minute lesson from the MarketPro academy, one of 16 in orders and execution.
A stop-loss order is an instruction to sell a position automatically if the price falls to a specified level, designed to help limit potential losses on a trade without requiring constant manual monitoring. Once the stock's price reaches the chosen stop level, the stop-loss typically converts into a market order (or in some cases a limit order) to sell.
A stop-loss order is an instruction to sell a position automatically if the price falls to a specified level, designed to help limit potential losses on a trade without requiring constant manual monitoring.
How It Works
Once the stock's price reaches the chosen stop level, the stop-loss typically converts into a market order (or in some cases a limit order) to sell. This means it does not guarantee an exact exit price—during fast price movements, the actual execution price can be lower than the stop level, a phenomenon sometimes called slippage.
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Lesson 2 of 16 in Orders and execution
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