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A stop loss order is a type of stock order or trading instruction that automatically sells a security when its price reaches a predetermined level For example, when the market moves against you and the price at which you purchased the securities drops, the shares are sold. Investors and traders use stop loss orders to limit potential losses without the need for constant monitoring.

This automated process is pivotal for risk management It sets a predetermined price limit, after which certain securities must be sold It gains significance especially in volatile markets where timely responses are imperative.

In trading, this term refers to an automatic risk management tool

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