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The loss is a trading tool that automatically sells safely if its price drops to a specific level, which helps investors reduce losses without monitoring the market continuously. Although it can protect from the sudden decrease, implementation prices may vary in fast markets. Various types of losses provide varying control of the implementation of trade, allowing investors to control their strategies based on risk and market conditions. A Financial Adviser It can help determine how to use a stop loss strategy based on your wallet.

The stop loss is a kind of Shares Or the trading instructions that sell safety automatically when its price reaches a pre -determined level. Investors and merchants use losing orders to reduce potential losses without the need for continuous monitoring. These requests are placed through mediation and remains active until the stopping price is run or the investor cancels the request.

Special loss orders are especially common in volatile markets, when prices can change quickly. By setting an suspension price, merchants create a threshold where they are ready to get out of a position. This type of arrangement helps to automate Risk Management Reducing the emotional side of decision -making, which can cause merchants from their pre -strategy.

When the investor puts an order to stop, the mediator turns the request to a Market order Once security reaches the specified stop price. The market matter is guided by mediation to sell the original at the best available price. This price may differ from the stopping price in the fast market.

For example, if the trader purchased an arrow at $ 50 and sets a loss order at $ 45, the stock will be sold automatically if its price decreases to $ 45 or less. If the stock decreases sharply, the implementation price may be less than $ 45 due to market fluctuations. This difference is known between the suspension price and the implementation price as slip.

You can use different types of loss orders, depending on your investment strategy. Some provide simple sale players, while others provide more flexibility in implementation. Here are three common ones that must be taken into account:

• Standard loss. The basic loss matter turns into the market matter when the price reaches the specified level. This guarantees implementation, but it does not guarantee a specific sale price. For example, if the investor bought an arrow at $ 75 and puts a loss at $ 70, the stock will be sold as soon as he reaches this level, although the final implementation price may be less.

• Arrange the stop loss. The backward loss order is dying dynamically as the price moves in favor of the investor. Instead of setting a fixed stop price, the suspension price follows the share by a fixed percentage or a dollar amount. For example, the 5 % increased stopping loss on shares purchased at a price of $ 100 will start the stop rate at the beginning at 95 dollars. If the stock rises to $ 110, the stopping price moves to $ 104.50, which is less than $ 110. If the price decreases from there, the stopping order is operated at $ 104.50.

• Stop the limit order. The matter of limiting the suspension is not, in the strict sense of the word, a kind of arrangement of loss of stopping, but it works somewhat similar and can also be used to manage risk. The difference is that, instead of converting to the market matter, it turns into an limit at a specific price. This prevents sale at a price lower than the price limit for the investor. Unlike the loss matter, it carries the risk of not implementing the demand at all if the price is moving very quickly. For example, if an investor purchased the shares at $ 40, and the stop price is set at $ 35 with a maximum of $ 34, the stock will not be sold only at $ 34 or higher, which may leave the investor with an unpaved thing if the prices decrease very quickly.