Stop loss

Stop loss is a method in the field of technical analysis that aims to limit losses and to get an estimate of how much you can lose on a position.

Stop loss means that you determine a share price level lower than the current share price at which you will sell the stock. You have to sell your shares when the stop loss level is reached. A stop-loss level should not be set too far from the current share price, the stop loss method is supposed to limit losses. You should not put a stop-loss level to close to the current share price, a short-term rebound can make you sell the stock even though the stock price rises the next day.

A stop-loss level should be set at the level where a sell signal had been triggered. The stop-loss technique is also useful for determining when to take a profit on a share position. You can apply a floating stop loss level that moves upward when the stock price rises.