The stop loss order stipulates that an investor wishes to execute a trade for a particular stock. When the price is touches during the trading. This is different from an orthodox market order. In which the trader just states that he wants to trade a stock at the existing market-clearing price. A stop loss order fundamentally an automatic order of trade given by a trader to its broker. The Stop-loss order only will become effective and will be executed. Once the price of the specified stock falls to the stated stop price mentioned in the trader’s stop-loss order.
The benefit of a stop loss order is an investor doesn’t have to monitor on a regular basis. This is exclusively very convenient when you are on tour or in such a situation that precludes you from monitoring your stocks for a longer period of time.
Some of the benefits of Stop loss Order are specified below:
- It helps in preventing the small losses from becoming a devastatingly large one.
- It prevents the sudden news which can come out of the blue and radically affect the price of a stock.
- Stop Loss protects the investor from mental shock and provides an emotional support to him.
- The best part of the stop-loss order is that the investor doesn’t have to bear cost to implement the same.
- The appropriate use of Stop Loss is very crucial in preserving the profits of an investor.
- It provides the deep understanding of fiscal reliability of the stock of various companies.
It provides the trader or investor a greater flexibility that might suit his style of trading where the adjustments can be done in accordance with changing market conditions. Stop Loss protects the investor or trader from huge losses in share market while trading or investing for maximum profit.