What is STOP LOSS? And why is it important for traders?

Stop-loss is basically a advance order to sell an asset when it hit the certain price point.Stop-loss in trading is a very powerful tool to protect traders against huge looses.

After understanding the concepts of stop-loss an individual trader can easily trade in the market with less stress because he already fixed a stop-loss where his shares will automatically sell.

A stop-loss should always be set before starting a trading and it should be fixed on a particular amount, it can save alot of capital and through the mistakes the trader can learn more stuffs and try to not repeat the same mistakes again.

If you will learn stock market course for beginners for trading, you will secure yourself from unnecessary looses and mistakes.

Types of Stop Loss Orders-

• Stop Market Order

The stop market order issues a market order once a specified price is reached, known as a stop price. As soon as the stop price is reached or exceeded, the stop market order becomes a market order and will be executed at the best possible price. The best possible price in fast-moving markets can be very different from what you expect.

• Stop Limit Order

Similar to a stop market order, a stop limit order is issued when the stop price is touched or exceeded. Although this gives you more control over where the order will be executed, it does not guarantee that your order will be filled.

• Trailing Stop

Trailing stops are stop-loss orders that trail behind the price if it moves in your favor. There is only one direction in which trailing stops move. As an example, once the trailing stop has moved up, it cannot move back down. In this way, trailing stops are not only to stop losses, but can be used to lock in profits for favorable trades.

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Let's recognize Stop-Loss with an example-

Suppose you are an intraday trader and you purchase Tata Power at market price of 500 and you've a goal of 530 rupees, however you know if it hits 490 rupees then it'll move downside so in that case you will set stoploss of 10 rupees.

And if the trade went against you, and it hits below 490, your stopp-loss will automatically fire and your stocks will automatically sell.And thats how top-loss works.

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