Stop Loss (SL)

Stop Loss - An order attached to a position that automatically closes the position if the price reaches a specified level, limiting loss. For a long position, the stop-loss is a sell stop below entry; for a short, a buy stop above. For example, if you buy EUR/USD at 1.1000 and set SL at 1.0950, a drop to 1.0950 triggers a market sell at that price (or worse). Babypips defines it as “an order to close out if the market price reaches a specified price… to prevent additional losses”. It is critical for risk management.