What is a Stop-Loss Order?
A stop-loss order is a special type of order used by traders and investors to limit their losses in the stock market. It automatically sells a stock or asset when its price reaches a certain predefined level, known as the stop-loss price.
🟢 Purpose:
To protect your capital by exiting a trade when the market moves against you.
🔍 Example:
Suppose you buy a stock at ₹500 and you set a stop-loss order at ₹480.
If the price drops to ₹480, the system will automatically sell your stock to prevent further loss.
This way, your maximum loss is limited to ₹20 per share.
🔑 Key Points:
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✅ Helps manage risk and emotions.
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✅ Can be used in both intraday and long-term trading.
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✅ Works even when you're not watching the market.
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❌ Not guaranteed in very volatile markets (due to slippage or gap-down opening).
🔄 Types of Stop-Loss Orders:
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Stop-Loss (Limit) Order: Triggers sell at a fixed price (may or may not get executed).
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Stop-Loss (Market) Order: Triggers sell at the next available market price (guaranteed execution).
📌 Summary:
A stop-loss order is like a safety net that protects you from big losses.
It helps you trade or invest with discipline by defining your maximum acceptable loss in advance. Every smart trader uses stop-loss to stay safe in unpredictable markets.