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Simple English definitions for legal terms
stop-loss order
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A quick definition of stop-loss order:
A stop-loss order is a type of instruction given to a broker to buy or sell a security when its price reaches a certain level. This helps investors protect themselves from losses by setting a predetermined price at which they want to sell or buy. For example, if an investor owns a stock that is currently worth $50 and sets a stop-loss order at $45, the broker will automatically sell the stock if its price drops to $45 or below. This can help prevent the investor from losing too much money if the stock's price continues to fall.A more thorough explanation:
A stop-loss order is a type of order in the stock market that instructs a broker to buy or sell a security when its price reaches a certain level, known as the stop price. This order is used to limit an investor's loss or protect their profit.
For example, if an investor buys a stock at $50 per share and sets a stop-loss order at $45, the broker will automatically sell the stock if its price drops to $45 or below. This helps the investor limit their loss if the stock price continues to fall.
Another example is if an investor buys a stock at $50 per share and sets a stop-loss order at $55, the broker will automatically sell the stock if its price rises to $55 or above. This helps the investor protect their profit if the stock price starts to decline.