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An order placed with a broker to sell a security when it reaches a specified price, designed to limit an investor's loss on a position.
A stop-loss order converts to a market order when the stop price is triggered. If you buy a stock at $50 and set a stop-loss at $45, the stock will be sold at the best available price once it drops to $45, limiting your loss to roughly 10%. A stop-limit order adds a minimum price floor below which you will not sell. Stop-loss orders are essential risk management tools but have limitations: in gap-down scenarios (where a stock opens sharply lower than the previous close), the execution price can be significantly below the stop price. Trailing stops automatically adjust upward as the stock price rises, protecting profits while allowing continued upside.