Stop Loss Order Definition

A stop loss order is a trading strategy to minimize losses and lock in profits on any stock or ETF. Stop loss orders allow you to setup your exit strategy in case the trade goes wrong or make sure your position remains profitable if the market goes in the opposite direction.

Stop Loss Order

Most brokerages let you setup a stop loss order in the Sell order type if you change the option from Market Trade to Stop Loss Order.

Real Life Example of Using a Stop Loss Order to Minimize Risk

Hertz Company (HTZ) filed for bankruptcy in May 2020 due to massive loses from the COVID-19 lockdown. The stock tumbled all the way down to less than $1 after the news broke. Using a stop loss order could have prevented huge losses.