"Stop loss order"

By the grace of Allah Ta'ala! You will be content and healthy, I am sure. Today I am going to participate in this lovely competition that @khursheedanwar is hosting. In this post, I will tell you about "stop loss order" in trading and it's importance, which has quickly gained popularity. I hereby invite everyone with respect to read my post.

What you understand by stop loss order in trading?

In trading, stop loss order is a tool that helps and protect us from losing too much money.
It automatically sells a stock and other asset when its price falls to a certain level that we set. We take an example, if we buy a stock for $200 and we do not want to lose more than $20 per share. Then we can set a stop loss order at $180. If the price of stock falls to $180, then stop loss order will work and our stock will be sold automatically. This is very useful for us as it helps us limit our losses and protect our investment without having to constantly watching continue the market.

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In simple words we can say that a stop loss order is like a safety net for our costly investments.It ensure us don’t lose more money than we’re willing to risk.

What is the importance of stop loss order while trading?

This has very importance in trading, we can stop our loss by using it. The importance of a stop loss order in trading is very important for many reasons:

• A stop loss order helps us to protect our investment by itself selling asset when its price falls to a certain level. This limits how much we can lose on a trade.
• Trading can be emotional and we take decisions based on fear or greed. It can lead us to bigger losses. On other hand stop loss order takes decisions without any emotions that are very good.

Freepik

• We can also use a stop loss order to lock in profits by setting it above our purchase price according to assets price. This way we can make profit without fearing of loss.
• Using stop loss orders helps traders to maintain discipline by making sure that they exit losing trades.This is the key to long term success in trading.
• With a stop loss order in place we do not need to keep monitor the market. The order will automatically work if the price hits our level. It keep free us from needing to watch the market all day.