Stop Loss
Co-Founder•1 min read
A stop loss is an order placed to automatically close a trade when the market reaches a specified price, limiting potential losses.
In FX and other financial markets, it acts as a risk management tool, ensuring that if the market moves against you beyond a set level, your position is sold (or bought) to prevent further loss.
Example:
A company buys EUR/GBP at 0.8500 and sets a stop loss at 0.8600. If the rate rises to 0.8600 (making euros more expensive), the trade automatically closes, capping the loss.
Used in:
FX trading, hedging strategies, and portfolio risk control.