Other Definitions
stop loss order (dict)
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Stop Loss OrderA stop loss order is an order given to a broker to to sell a security when it reaches a certain price. It is a method developed to protect those unable to frequently monitor the market and is designed to limit an investor's losses in the event of an unexpected drop in the price of a security. For example, if an investor purchase a stock at $50 and place a stop-loss sell order with his broker at $40 to sell and the share price dropped to $40 for whatever reason, the broker would have an order to sell at $40 already registered and the transaction would proceed if there were buyers at the specified price. Conversely, if an investor sells a stock short, or in other words borrows stock and sells it, hoping for a decline in the share price so he can buy back the stock later at a lower price before returning the stock the investor can protect himself against losses if the price goes too high using a stop-loss order. In that case you might place a stop-loss buy order on the short position, which turns into a market order when the price goes up to that figure. A trailing stop loss is a slightly more complicated version of the stop-loss order in which the stop loss price is set at a fixed percentage below the market price. If the market price rises, the stop loss price rises proportionately, but if the share price falls, the stop loss price doesn't change. That method allows the investor to set a limit on the maximum possible loss without setting a limit on the maximum possible gain, and without requiring paying attention to their investment on an ongoing basis. External links Stop loss order
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