Here's a practical way to think about stop-loss orders: 1) What it is: a rule telling you to sell if the price hits a certain level, to limit losses or protect gains. 2) How it works: If you buy at $50 and set a stop at $45, when the price trades down to 45, your order becomes a sell order. If the market is liquid, you’ll probably sell around 45; in fast markets you might get a price a bit lower (slippage). 3) Types: Stop-market (sells at the next available price) vs stop-limit (sells only at/above a price you set, but may not fill). 4) Practical steps: - Decide your maximum risk per trade (e.g., 5% of entry price or a fixed dollar amount). - Set the stop price accordingly (e.g., 5% below entry price). - Choose the type (stop-market for guaranteed exit, stop-limit for price control but no guaranteed fill). - Place the order and monitor; adjust as needed if the stock’s fundamentals change or you want to protect profits. 5) A quick example: - You buy at $50. - You set a stop at $45 (a 10% drop). - If the price drops to 45, you’ll likely sell around 45. - If a sudden drop gaps to 40, you may sell near 40 due to market conditions; that’s the risk of stop-loss in fast markets. 6) Takeaway: stop-loss orders can help manage risk and keep you disciplined, but they aren’t a guarantee against all losses.

Stop-loss order: An instruction to sell a security if its price reaches a specified stop price, intended to limit an investor’s loss on a position or to protect profits. When triggered, it becomes a market order (or a limit order if you choose stop-limit). It helps you set a predefined exit, reducing the impact of emotions and sudden market moves.