Stop-Loss Order
A resting instruction that becomes an active order only once the price reaches a stated trigger level, used to cap a loss.
How it is identified
For a long position: trigger below the entry price; for a short position: trigger above it
Unit
qualitative
In depth
A stop-loss is dormant until the trigger prints, at which point it enters the book as a market or limit order — so the trigger price is not the fill price. In a gap or a fast move, the fill can be far worse than the trigger, which is why a stop-loss caps intent rather than loss. Placing the stop too close to the entry guarantees being taken out by ordinary noise; the correct distance is set by the instrument's volatility, and then the position is sized down to keep the rupee risk constant. A stop is a risk-management tool, not a prediction that the price will stop falling there.
Worked example
Long at ₹500 with a stop trigger at ₹480, risking ₹20 a share. Overnight bad news opens the stock at ₹440, the stop triggers and fills near ₹440, so the actual loss is ₹60 a share — three times the intended risk.
Illustrative figures, chosen so the arithmetic is easy to follow. Not a live price and not a valuation of any company.
Educational reference only
This entry explains what “Stop-Loss Order” means. It is not investment advice and not a recommendation to buy or sell any security. Any numbers above are illustrative, not live prices, and nothing here predicts price direction or rates a stock. Consider your own circumstances and consult a SEBI-registered investment adviser before acting.