What is a stop loss order (in terms of stock investing) ?

Question

What is the purpose of a stop loss order?

Are there any other names for it ?

Answer 1

An order placed with a broker to sell a security when it reaches a certain price. It is designed to limit an investor's loss on a security position. If you want to sell a stock at $10 and not 9.99 and lower you put a order to sell at specifically $10. Also known as a "stop order" or "stop-market order". They drawbacks can be if you wanted to sell at $10.50, the stop order will ignore that higher price and wait until you lose the .50 cents before selling.

Answer 2

Maria is right, that is what a stop loss is. However, you can also use it to protect profits, by moving the stop up as the price increases. Here is a website that explains it well:

wikipedia.org/wiki/Stop_loss_order

Maria is wrong that the drawback is the stock that reaches $10.50 won't be sold until it falls to $10.00, in her example. You would move your stop loss up to $10.50, or place another kind of order, called a limit order.. So, let's say you bought a stock at $7.00 per share. Now, it is worth $10.25 per share. You can put a stop loss on, if it falls to $10.00, sell it, and you have made $3.00 per share. But, if it doesn't fall, you can hold it longer. You can place a limit order to sell it, at $10.50 or better, and the broker will follow your directions. The purpose of a stop is to limit your downside. The purpose of a limit order is to sell your stock when it reaches a particular price. They are not the same thing.

Answer 3

Stop if Bid

A Stop if Bid order is used to buy or sell a currency is the Bid price breaches the specific level in the price field. Typically, Stop if Bid orders are used to buy a FX position in order to make sure a certain level is broken.

Stop if Offer

A Stop if Offer order is used to buy or sell a currency is the Ask price breaches the specific level in the price field. Typically, Stop if Offer orders are used to sell a FX position in order to make sure a certain level is broken.

Linking orders offers traders a logical aggregation of order types that outline contingencies in market participation, making it much easier to trade in moving markets.