Stop-Loss Order
Definition
An order to sell a security when it reaches a specified price, designed to limit losses on a position.
Explanation
A stop-loss at $90 on a stock bought at $100 limits the loss to approximately 10%. Stop-losses convert to market orders when triggered, meaning execution may occur below the stop price (slippage). Trailing stops move upward with the stock price, locking in gains while maintaining downside protection. Mental stops (not entered as orders) are psychologically difficult to execute because they require selling at a loss — behavioral finance research shows most investors hold losers too long and sell winners too early (disposition effect).
How Stoquity Uses This
Stoquity incorporates stop-loss order analysis across its portfolio management platform, providing real-time monitoring and AI-powered insights for every portfolio.