A Stop-loss order is a function that helps an investor to limit the losses in case the trade is going against their predictions and expectations.
A stop-loss order is an advanced trade order that most brokerages let you place. A stop-loss order is meant to limit the amount of money an investor could lose on a trade. It’s a system that lets you sell a stock when it hits a certain price. This way, if the stock price goes down, you lose less money.
How it works is as follows:
Let’s say that you bought shares of Company X for INR 100 per share. Now that the market is unstable, you want to make sure you don’t lose too much. A stop-loss order could be set at INR 90. This means that if the price of Company X’s shares drops to INR 90, your shares will be sold immediately at the best price on the market.
It’s important to remember that setting a stop-loss price doesn’t mean you’ll sell your shares at exactly that price. This is especially true in a market where prices can change quickly. Instead, when the price falls to that level, it starts a sale.
You can place a stop-loss order on the Bombay Stock Exchange (BSE) by choosing the “Stop Loss” order type when you place a sell order. You would need to put the “Trigger Price” (the price at which your order is executed) and the “Limit Price” (the lowest price at which you are ready to sell the stock).
Keep in mind that the stop-loss order is not a surefire way to avoid loses. For example, if the price of the stock “gaps down,” which means it starts at a price that is much lower than the price it closed at the day before, the stock could sell for much less than you expected. But even though it has some flaws, it is a useful tool for managing investment risks