Stop order

Stop order or stop loss is a type of limit order that allows the trader to enter or exit a trade at a pre-determined price without constant monitoring. A stop order prevents the trader from taking a bigger loss if the price set by the trader to exit a trade was triggered. On a short position, a stop order instructs the broker to buy a particular number of shares at a pre-determined price, preventing the trader from buying the stock back at a much higher price. In the event of a price slide where the price is not hit, the stop order will become a market order.

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