What is STOP LOSS?

 In trading, a stop loss (SL) is an order to close a position when it reaches a certain price, limiting potential losses if the market moves against you. It's a risk management tool that helps traders:

1. Limit losses

2. Protect capital

3. Set a maximum risk level

4. Avoid emotional decisions

5. Stick to their trading plan

A stop loss order is typically set at a price level below the current market price for a long position (buy) or above the current market price for a short position (sell).

Example:

- Buy ABC stock at Rs.100 with a stop loss at Rs.95

- If the price falls to Rs.95, the position is automatically closed, limiting the loss to 5 points or Rs.5

Stop losses can be:

1. Fixed: Set at a specific price level

2. Trailing: Moves with the market price, maintaining a fixed distance

3. Volatility-based: Adjusts to market volatility

Remember, stop losses are essential for managing risk and maximizing potential returns in trading.