An order placed with a broker to buy or sell a security when it reaches a certain price, used to limit an investor's loss on a position. Stop-loss orders are essential tools for managing risk, as they can automatically close a position before losses escalate. They provide a safety net by protecting investments from significant downturns.
Example: An investor holds a stock at $50 per share and places a stop-loss order at $45 to automatically sell the stock if its price falls to that level.
