stoplossorders

Stop-loss orders are instructions to execute a trade once the price of a security reaches a specified level. They are used to limit an investor's potential losses or to protect gains on a position by automatically exiting when market conditions move unfavorably.

There are several common forms. A stop-market order becomes a market order when the stop price is reached, and is then filled at the prevailing market price. A stop-limit order becomes a limit order once the stop price is reached, with a specified limit price; this can prevent slippage but may not be filled if the market moves past the limit.

Stop orders can be used on long or short positions; for a long position, a stop-loss is typically placed below the entry price; for a short position, above the entry price. A trailing stop is a related type that moves with the price to lock in gains or limit losses.

Limitations include price gaps and fast markets; a stop-market order could be filled at a poor price, while a stop-limit may not be executed at all if the price skips beyond the limit. In illiquid assets, slippage risk is higher, and execution can depend on the venue and market conditions.

Example: if you own stock at 100 and set a stop at 90, the system will sell if the price falls to 90 or lower. If you set a stop at 90 and a limit at 89, the sale will only execute at or above 89 and may not occur if prices plunge. Stop-loss orders do not guarantee an exit price.