Stop-Loss

A predefined point at which a trade should be exited to prevent a larger loss. Your stop-loss is the price where you concede your trade and get out. Typically a stop loss is a preset limit order which will automatically sell if the limit price is hit.

Why it matters

Stop-losses are an essential aspect of risk management. They are the backbone of your risk:reward ratio. Even the best traders have losing trades, but its the ability to control those losses that separate profitable and unprofitable traders.