What is Stop Loss?
An automatic order that closes a position at a pre-set price to cap loss — the foundational risk-management tool.
A stop-loss is a pending order placed at a price level past your entry that, when reached, automatically closes the position at market. Its purpose is to cap downside per trade so a single bad position cannot blow up the account.
Two variants: a hard stop is filled at market regardless of slippage, giving certainty of execution but possibly worse fills during volatility. A guaranteed stop (rare, costs a fee) fills at the exact level you set — used during news events and exotic pairs.
Position sizing formula: lot = (account × risk-%) / (stop-loss-pips × pip-value-per-lot). A trader with a $10,000 account willing to risk 1% per trade with a 50-pip stop trades 0.2 lots: $100 / (50 × $10) = 0.2 lots. Following this rule means it takes 100 consecutive losing trades to lose 63% of the account — statistically near-impossible for any strategy with even a 35% win rate.