A stop loss is a preset level that automatically closes a trade once losses reach a certain point.
A stop loss is a risk-management order that closes a position automatically when the price reaches a level the trader has chosen in advance. Its purpose is to cap the loss on a trade so it can’t grow beyond a planned amount. By deciding the exit point before emotions get involved, a stop loss helps traders stay disciplined and avoid holding onto a losing position in the hope it recovers. It is one of the simplest and most widely used tools for protecting capital, and a core habit of structured trading.
Think of a stop loss like the automatic shut-off on an electric kettle. You don’t have to stand and watch it — once it reaches a set point, it stops on its own. A stop loss does the same for a trade: you decide the limit in advance, and it closes the position for you so the loss can’t keep growing.
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