Definition
A stop order placed to close a position automatically if price moves a set amount against it, to limit the loss.
The story
A trader buys at $50 and places a stop-loss at $47, deciding in advance that a $3 loss is the most they want to take on this trade. A stop-loss isn't a guarantee: if price gaps past the stop overnight or falls fast, the order fills at the next available price, which can be worse.
Why markets watch it
It's a common way traders define their risk before a trade.
Connects to
Stop orderRisk-reward ratioPosition sizeSlippagePrice gapRisk managementLoss aversion
We explain why it moves markets. What you do with it is your call. Commentary and education only. Not financial advice. All terms