Stop losses

Stop losses

A stop loss is an order that automatically closes your trade at a specified price. This works as a safety stop to reduce risks, protecting your trading capital in the event that the trade does not work out.

Stop losses are also sometimes called "stop orders" or "stop market orders".

To learn how and where to place stop losses, read our lesson:

Lesson
Placing stop loss orders effectively can be the difference between a winning strategy and a losing one. Learn about the different types of stop losses and where they go.
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We also have a tutorial on how to place a stop loss on MetaTrader 4:

Article
How to open and close trades, enter a stop loss/take profit and enter/cancel an order in MT4.
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Remember: While a stop loss limits your risk and is always recommended, it does not protect you from market gaps and is not a substitute for money management.

Example of using a stop loss

Say you traded forex — you could set a stop loss order with your broker so that if the price you paid on your currency pair falls by 5 pips, your order would immediately stop out, limiting your loss to a 5 pip loss. Setting the stop loss at 10 pips would similarly limit your risk to a 10 pip loss if the paid price drops by 10 pips.

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