Risk management · Glossary
Stop-loss
An order or planned level intended to limit loss on a position.
Definition and explanation
A stop-loss is a risk-management instruction to exit or reduce a position after a trigger condition is reached. Execution price can differ from the trigger because of gaps, volatility, liquidity or order type. Stop-losses reduce some risks but cannot guarantee a maximum realised loss in every market condition.
Example
A trader entering at $50 may plan a stop at $48; a market stop can execute below $48 if the market moves quickly.
Educational information only. Trading terms and contract mechanics can vary by venue and market. Verify the rules of the provider you use.