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.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Sign up to Money Morning
Our team, led by award winning editors, is dedicated to delivering you the top news, analysis, and guides to help you manage your money, grow your investments and build wealth.
-
The best houses for sale with wildflower meadows
The best houses for sale with wildflower meadows – from a 1770s mill house in Petersfield, Hampshire, to a cottage in Fittleworth, West Sussex
By Natasha Langan Published
-
Will a Santa Rally bring festive cheer to investor portfolios this year?
Investors will be hoping for a seasonal stock market boost in December
By Marc Shoffman Published