Stop Loss Order
A stop loss order is an order placed with a broker to buy or sell a security when it reaches a certain price. It is designed to limit an investor’s loss on a security position. A stop-loss order is an instruction to the broker to execute a trade, once the security reaches a certain price. It is used to limit an investor’s loss on a security position. For example, an investor might place a stop-loss order for a stock they own when the price reaches $50. If the price drops to $50 or lower, the order will be executed and the investor’s loss will be limited to the stop-loss price.
History of Stop Loss Order
The concept of a stop loss order has been around since the early days of stock trading. It was first used by traders in the 19th century to limit their losses on a stock position. The idea was to set a price at which the trader would sell the stock if it dropped below that price. This allowed the trader to limit their losses and protect their capital.
In the modern era, stop loss orders have become a popular tool for investors. They are used to limit losses on a security position and to protect capital. Stop loss orders are also used to take advantage of short-term price movements in the market. By setting a stop loss order, an investor can limit their losses if the price of the security moves against them.
Comparison Table
Type of Order | Description |
---|---|
Market Order | An order to buy or sell a security at the best available price. |
Limit Order | An order to buy or sell a security at a specified price or better. |
Stop Loss Order | An order to buy or sell a security when it reaches a certain price. |
Summary
A stop loss order is an order placed with a broker to buy or sell a security when it reaches a certain price. It is designed to limit an investor’s loss on a security position. Stop loss orders are used to limit losses on a security position and to protect capital. They can also be used to take advantage of short-term price movements in the market. For more information on stop loss orders, investors can visit websites such as Investopedia, The Balance, and Investing.com.
See Also
- Market Order
- Limit Order
- Stop Limit Order
- Trailing Stop Order
- Stop Market Order
- Good Till Cancelled Order
- Fill or Kill Order
- Immediate or Cancel Order
- All or None Order
- Market on Close Order