Risk management
Stop-loss
A stop-loss automatically closes your position if the price hits a loss level you set in advance.
A stop-loss automatically closes your position if the price hits a loss level you set in advance.
The stop-loss is a trader's survival tool. Before you even enter, you decide the price at which you accept you were wrong and place a stop there. If the market reaches it, the position closes on its own and your loss is capped.
Its job is not to be right, but to keep a small loss from becoming a big one. Trading without a stop lets a single bad position wipe out weeks of gains. Setting your stop is part of the trading plan, not improvisation.
You buy at $50 and decide not to risk more than $2. You set a stop-loss at $48. If the price falls to $48, you exit automatically with a known $2 loss per share, instead of watching the drop continue.
Understanding a term is good. Applying it on a real platform with a clear method is better. That is exactly what we do in 5 days.