A stop loss is an order that automatically closes your trade at a specified price. This works as a safety stop to reduce risks, protecting your trading capital in the event that the trade does not work out.
Stop lossesA stop loss is an order that automatically closes your trad... More are also sometimes called “stop orders” or “stop marketWhat are value stocks? A value company is a company that app... More orders”.
To learn how and where to place stop losses, read our lesson:
We also have a tutorial on how to place a stop loss on MetaTrader 4:
Example of using a stop loss
Say you traded forex — you could set a stop-loss orderWhat is a trade order? In trading, an order can be defined... More with your brokerWhat is an online broker? In online trading, a broker is a ... More so that if the priceWhat are value stocks? A value company is a company that app... More you paid on your currency pair falls by 5 pips, your order would immediately stop out, limiting your loss to a 5 pip loss. Setting the stop loss at 10 pips would similarly limit your risk to a 10 pip loss if the paid priceWhat is price? The price is the measure of the value of good... More drops by 10 pips.
Remember: While a stop loss limits your risk and is always recommended, it does not protect you from market gaps and is not a substitute for money management.