Stop-Loss Order

Definition

A stop-loss order is an order placed with a broker to buy or sell a specific stock once it reaches a certain price, designed to limit an investor's loss on a position. For a long position, a stop-loss is placed below the current market price. When the stop price is reached, the stop-loss order becomes a market order and is executed at the next available price. A trailing stop-loss adjusts automatically as the price moves in your favor. While stop-losses help manage risk, they can be triggered by temporary price fluctuations (whipsaws) and may execute at a worse price than expected during fast-moving markets (slippage).