#StopLossStrategies A "stop loss" strategy is a risk management technique used by traders and investors to limit their potential losses on an open position. It involves placing a sell order (stop loss order) with their broker, which is automatically triggered if the asset's price reaches a certain predetermined level.

How does a stop loss order work?

1. Choosing the stop loss level: The investor decides on the price level at which they want to sell their asset to limit their losses. This price level is generally based on technical or fundamental analysis.

2. Placing the order: The investor places a stop loss order with their broker, specifying the price level at which the order should be triggered.

3. Triggering the order: If the asset's price reaches or exceeds the stop loss level, the order is automatically triggered and converted into a market sell order.

4. Executing the order: The broker executes the sell order at the available market price, allowing the investor to limit their losses.

Types of stop loss:

• Fixed stop loss: The stop loss price level is fixed and does not change. It is easy to set up but may be triggered prematurely if the price fluctuates temporarily.

• Trailing stop loss: The stop loss price level automatically adjusts based on the asset's price movement. It helps protect profits while limiting losses. For example, a trailing stop loss can be configured to follow the price upward at a certain distance (e.g., 5% below the highest price reached).

• Volatility-based stop loss: The stop loss price level is determined based on the asset's volatility. The higher the volatility, the further away the stop loss will be from the current price.

• Time-based stop loss: The sell order is triggered after a certain period, regardless of the asset's price.