Stop-loss

A stop-loss is an instruction given to a broker to by or sell a stock to limit losses if it moves beyond a certain level.

A stop-loss is an instruction given to a broker to by or sell a stock to limit losses if it moves beyond a certain level.

For example, if you buy a share at 100p but don't want to bear losses of more than 20p (20%), you might put in a stop-loss so that if the shares fall by more than 20%, they are automatically sold. This doesn't guarantee they will be sold at 80p, though, just that the order to sell will be given at this point.

Although brokers advise having stop-losses as a safety net, it is not always a good idea to set them at a price that is too close to the price at which you bought them. This is especially important if the share is volatile, because if the reasons you bought the share still hold good, you may find yourself selling when you don't really need to.

Most Popular

Get set for another debt binge as real interest rates fall
UK Economy

Get set for another debt binge as real interest rates fall

Despite the fuss about rising interest rates, they’re falling in real terms. That will blow up a wild bubble, says Matthew Lynn.
15 May 2022
Is the oil market heading for a supply glut?
Oil

Is the oil market heading for a supply glut?

Many people assume that the high oil price is here to stay – and could well go higher. But we’ve been here before, says Max King. History suggests tha…
16 May 2022
Value is starting to emerge in the markets
Investment strategy

Value is starting to emerge in the markets

If you are looking for long-term value in the markets, some is beginning to emerge, says Merryn Somerset Webb. Indeed, you may soon be able to buy tra…
16 May 2022