Stop-Loss Order

An instruction to close a position automatically once the price reaches a set level.

Example

A stop 50 pips below entry closes a long position if the pair falls that far.

Important

It is not a guarantee: prices can gap past the stop, especially around news or over weekends, and fill at a worse level.

Related terms

  • Slippage — The gap between the quoted price and the average price a trade actually achieves, caused by consuming successive levels of the order book.
  • Position size — How much of your total capital a single holding represents - the weight that decides how much any given move actually matters to you.

Lessons that explain it

  • Appraising one trade: size it from the loss, not from the leverage — Before a currency trade, set how much of your account you will risk, where the trade is wrong, and what the broker and costs add. Position size follows from those, never from the maximum leverage available. (12 min)

All 578 terms in the Investing glossary