#StopLossStrategies What is a stop-loss?

A stop-loss is a type of order that instructs a broker to sell a security once it drops to a predetermined price, called the stop price. This helps protect traders from significant losses if the market moves unfavorably.

Common types of stop-loss strategies:

1. Fixed price stop-loss – Triggers a sale when the asset reaches a specific price.

2. Percentage-based stop-loss – Activates when the asset drops by a set percentage from the entry price.

3. Trailing stop-loss – Moves the stop price in line with favorable market movements, locking in gains while managing downside risk.

Advantages of using stop-losses:

Helps contain losses

Enhances overall risk management

Encourages discipline and adherence to a trading plan

Important considerations:

A stop price set too close might lead to premature exits.

A stop price set too far may fail to prevent large losses.

Market volatility and liquidity can affect the reliability of stop-loss execution.