What is Stop Loss Order

A stop loss order is a Normal order placed with a broker to sell a security when it reaches a certain predetermined price Trigger Price. Sometimes the market movements defy your expectations. Such market reversals often result in loss bearing transactions. The stop loss trigger price is your defense mechanism- an amount at which you will be able to sustain yourself against such unanticipated market movements. Your stop loss instruction is an order to sell when the price of contracts reaches a pre-determined level - the trigger price. Naturally, this price cannot be more than the price of the stock you are trading.