What a stop-loss actually does
The one order that decides your worst-case loss before you ever need it.
A stop-loss is a price you pick in advance. If the stock falls to that price, your broker sells automatically. You do not have to be watching.
The point is simple: you decide how much you are willing to lose on a trade before the trade goes wrong, not in the panic of the moment.
A quick example
You buy a stock at $100 and set a stop-loss at $92. If it drops to $92, you are out — an 8% loss, capped. If it keeps falling to $70, that is the market’s problem, not yours. You already left.
Stops are not magic. In a fast drop the sale can happen a bit below your price, and a stop that is too tight can kick you out of a stock that was only wobbling. The skill is picking a level that gives the trade room but still protects you.
A stop-loss caps your downside on purpose, before emotions get a vote.
Not financial advice · for research and educational purposes only. Nothing here is a recommendation to buy or sell any security. All investing carries risk of loss.