What Is a Stop Loss

A net under the trade

A stop loss is a sell order that waits below your entry and closes the trade if the price reaches it. On 28 August 2026 you buy the euro against the dollar at the open, 1.16530, and set a stop loss at 1.16330 — a pip is the fourth decimal place, so twenty pips lower. Nothing happens while the price stays above that line. If it falls onto it, the platform sells for you and the trade ends, twenty pips down. If it never gets there, the stop does nothing at all. The most the trade can lose is written down before it opens, by you.

The day it caught the trade

Here is that day, hour by hour. For sixteen hours the price stayed above 1.16330, and the stop sat there doing nothing. In the 17:00 hour the price fell fast, through the line, and the stop became a market sell: the trade was closed at about 1.16330, twenty pips down, two hundred dollars at one lot. The day kept falling, to 1.15776, and closed at 1.15820. The trade was already closed, and none of the rest of the fall was yours.

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