A Stop Loss is an order to close a trade when the market moves a specified amount against the position.
The purpose of setting up a stop loss order is to put a safety net on transactions. Without a stop, a trader could potentially lose all his funds if the trade went against them. A stop position reflects a trader pain point, where the market has turned so far against him that he needs to exit his position. As a result, stop orders are useful for money management in controlling losses, helping to ensure a trader is controlling their risk exposure.
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