Glossary

A stop-loss order is a type of trading order that helps investors minimise losses by automatically selling a security when it reaches a predetermined price level. 📉

This order type is designed to limit an investor's potential loss on a trade, acting as a safety net during unfavourable market movements.

Example: An investor buys a stock at £50 and sets a stop-loss order at £45. If the stock's price falls to £45, the stop-loss order is triggered, and the stock is sold automatically, limiting the investor's loss to £5 per share.

Fun fact: Stop-loss orders can be particularly useful in volatile markets 🌪️ where rapid price swings can cause significant losses in a short period. However, they also carry the risk of being triggered by temporary price dips, causing the investor to miss out on potential gains if the stock price rebounds.