Stop-loss
A stop-loss is a pre-set order that closes a position once price reaches a defined level, capping the loss on that trade at a known amount.
Its function is to convert an unknown loss into a known one, decided before the position is open and before the emotional pressure of an adverse move is present.
Placement should follow the chart rather than the desired position size — a level at which the reason for the trade is invalidated. Placing it at whatever distance permits a larger position inverts the logic and guarantees the stop sits somewhere with no analytical meaning.
Moving a stop further away while a trade is losing is the single most reliable precursor to an outsized loss. It converts a defined risk into an undefined one at precisely the moment judgement is least reliable.
A stop-loss is not a guarantee of exit price. In fast markets or on gaps, execution can occur beyond the stop level — a phenomenon called slippage.
Related terms
Maintained by Jared Sinclair, Founder · Syrax Global FZCO · Definitions are educational, not financial advice.
Knowing the vocabulary is the easy part.
Every term here can be learned in an afternoon. Applying them consistently under pressure is the part that decides outcomes — and the part we measure.