Please eli5, would somebody be so kind to explain what a stop loss is to me?
I keep reading and I just go huh. Numbers and economics ive always found confusing. Is a stop loss a point at which if the stock drops you go ok I call it quits and you don’t panic or buy or sell anything after said point? Or is it a point where if said stock drops to a certain point, an automatic function is in place to purchase a set amount of said stock? I don’t know. Any explanation at all would be appreciated!
Edit: Thankyou Thankyou Thankyou for all your replies! I appreciate it and you’ve given me hope that I can learn new things I otherwise would’ve had no idea where to start with
In: 3
A stop loss order is a standing order to sell a security if the price falls below whatever stop you set. i.e. You buy stock ABC for $100/share. You decide you’re not willing to take more than a 20% haircut if things don’t go your way so you put a stop loss order in place at $80. If at any point the stock drops to below $80 then your shares will be sold.
Just a warning, these stop loss orders aren’t perfect. If the stock drops super fast then the shares might sell for less than the stop you set.
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