What is a stop loss order? What is the purpose of a stop loss order?
2023-06-05
Summary:
A stop loss order is a trading instruction used to automatically execute a buy or sell operation when the stock price reaches a specific price. Its main function is to help investors exit trading in a timely manner when losses reach a certain level, thereby controlling risks.
Stop Loss OrderOrder is an order that is bought/sold at an agreed price. Traders can preset a stop loss order and use it to automatically clear open positions when the specified price is reached or exceeded. The purpose of setting a stop loss order is to enable investors to avoid additional losses in a timely manner if the price fluctuates in the opposite direction as determined by the investors.
For example, if investors plan to long EUR/USD at 1.2230. To limit maximum losses, investors set a stop loss order at 1.2200. This means that if the investor's direction is wrong and the euro/dollar falls below 1.2200, the trading platform will automatically execute the sell order for the investor at 1.2200 and lock in a loss of 30 points.
Investors can set stop loss orders while opening their positions. The stop loss order will remain valid until the position is closed or the stop loss order is cancelled.
The role of stop loss orders
1) A method of placing orders to help maintain profits and limit losses for stock and option holdings. Enter a fixed stop loss price for these order types. Once the stop loss price is triggered, it will be sent to the market as a market order.
2) When the price fluctuates in the opposite direction as expected, it is a protective order set up for closing positions.
【 EBC Platform Risk Reminder and Disclaimer 】: There are risks in the market, and investment needs to be cautious. This article does not constitute investment advice.
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