What is stop-loss order?

A stop loss turns a decision you made calmly into an action that happens even when you are not watching or not calm. It should sit at the invalidation level, the price where your thesis no longer holds, rather than at a round number or a dollar amount you pulled from the air.

Moving a stop further away to avoid taking a loss is one of the most expensive habits in trading. It converts a planned, small loss into an unplanned, large one.

In fast markets a stop can fill at a worse price than set, called slippage, which is one more reason to size positions conservatively.