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Do you know what a Stop Loss is??

In trading, a stop loss is a sell order that is automatically triggered if the price of an asset falls to a predefined level. It is a risk management tool that helps limit losses in case a trade does not turn out favorable.

In detail:

Function:

The stop loss serves to protect a trader's capital by setting a loss limit. If the price of the asset moves against the position, the stop loss order is triggered and closes the trade, preventing losses from exceeding the predefined amount.

Example:

If a trader buys a stock at $100 and places a stop loss at $95, if the price of the stock falls to $95 or lower, the stop loss order is triggered and sells the stock automatically.

Importance:

The stop loss is a fundamental tool for risk management in trading, as it helps avoid uncontrolled losses and protect capital.

Types of stop loss:

There are different types of stop loss, such as market stop loss (which is executed at the available market price) and limit stop loss (which is executed at a specific price).

Benefits:

Limits losses: The main benefit of a stop loss is to limit potential losses in case a trade is unprofitable.

Risk management: It allows traders to better manage risk by setting predefined loss limits.

Capital protection: It helps protect the trader's capital from excessive losses.