What is a stop-loss order?

A stop-loss order is a buy or sell order for a specific asset at a predetermined price. The goal of a stop-loss is to limit the losses of an open position. For example, a stop-loss order set 3% lower than the purchase price of the asset will cap your loss at that amount. Let's say you paid $20,000 for Bitcoin. Once you buy Bitcoin at this price, you will set a stop-loss order at $19,400. Your open position will be sold at the current market price if the price of Bitcoin falls below $19,400. It is important to note that a stop-loss order can only be placed with an open position.

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