TradingBeginner
Stop-Loss
A pre-set order that exits a position once the price hits your maximum acceptable loss.
Detailed explanation
You decide the exit level before emotion arrives. A stop-loss market order triggers and fills at whatever price is available, while a stop-loss limit order will not fill below your limit — and may not fill at all in a fast market. Gaps can execute far from the trigger.
Formula
Stop price = Entry price × (1 − Risk tolerated per trade)
Example
Buying at ₹500 with 5% tolerance sets the stop at ₹475, capping the loss at ₹25 per share before slippage.
Why it matters
Risk management, not entry selection, is what keeps traders in business over a long enough period.
Key points
- Overnight gaps can blow through the trigger price.
- Placing the stop just below an obvious level invites a shakeout.
- Size the position from the stop distance, not the other way round.
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Educational content only. Definitions and examples are illustrative and are not investment, tax or legal advice.