TradingBeginner#Risk Management#Safety
Stop Loss
S
Definition
An advance order to sell an asset when it reaches a specific price point, used to limit loss on a position.
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Concept Diagram
Key Takeaways
1
A Stop Loss transforms a potential total loss into a defined, manageable expense.
2
Trailing Stops lock in profits by moving upward with the price during a bull run.
3
Agentic Stops use AI to monitor volume and order book depth, avoiding stop-loss hunting.
4
In institutional trading, 'never trade without a stop' is the first rule of survival.
Practical Example
You buy ETH at $3,000 and set a stop loss at $2,700 (10% below). If ETH drops to $2,700, your position is automatically closed, capping your loss at 10% instead of risking a larger crash.
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Related Terms
Trading
DCA (Dollar Cost Averaging)The practice of investing a fixed amount of money in an asset at regular intervals, regardless of the price, to reduce volatility impact.
Trading
Hedge (Cobertura)A position taken to offset potential losses in another investment, essentially acting as an insurance policy.
Trading
LiquidationThe forced closing of a leveraged position by an exchange when the user's collateral is no longer sufficient to cover the potential losses.
Blockchain
VolatilityThe rate at which the price of an asset increases or decreases over a specific period, reflecting market uncertainty.
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