• A stop loss order indicates that a stock should be bought or sold when it reaches a certain price, known as the stop price.
  • Once the stop price is reached, the stop order becomes a market order and is executed at the next available opportunity.
  • Stop loss orders are used to limit losses or take profits on existing positions.
  • They can protect investors with both long and short positions.
  • A stop-loss order differs from a stop-limit order in that the latter must be executed at a certain price, not at the market price.