🛑 Stop Loss
📚 US Capital Private Bank Knowledge Base
📖 Definition
A Stop Loss Order is an order placed with a broker to automatically sell a security when its price reaches a specified level. It is designed to limit an investor’s loss on a position by triggering a sale before losses grow larger.
⚙️ How It Works
The investor sets a stop price below (for long positions) or above (for short positions) the current market price. When the stop price is reached or passed, the stop loss order becomes a market order and is executed at the next available price.
📝 Key Features
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🔄 Automatic Execution: Limits losses without needing constant monitoring.
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⚖️ Risk Management Tool: Helps control downside risk.
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💵 Flexible: Can be set as a fixed price or a percentage of the purchase price.
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⚠️ Market Risk: Execution price may differ from stop price in volatile markets.
✅ Benefits
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Protects capital by limiting potential losses.
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Removes emotional decision-making in trading.
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Enables disciplined risk management strategies.
⚠️ Risks & Considerations
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Price gaps can cause execution at worse prices than expected.
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Stop loss orders do not guarantee execution at the stop price.
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Frequent use can result in being stopped out during normal price fluctuations.
🔎 Related Terms
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💸 Margin Trading
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📈 Take Profit Order
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⚖️ Risk Management
📚 References
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🌐 Investopedia – Stop Loss Order
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📄 Securities and Exchange Commission (SEC) – Order Types
📞 Contact US Capital Private Bank
📧 Email: [email protected]
🌐 Website: https://uscapitalprivatebank.com