Stop loss

Stop loss is an order issued by an investor to their broker to sell a security if its price falls below a specific price. 

The stop loss order is valid for a day and lapses if not triggered during that trading day.

Example

For a company’s common shares trading at Rs 400 a share, a stop loss may be issued incase the price is expected to fall, with the stop loss price being Rs 380. Should the share price continue falling and go below Rs 380, the investor’s shares are sold automatically.