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Over 700 finance terms, Shmooped to perfection.
A trade order you give your broker to stop the bleeding.
If you think a security is heading down in price, you can put in this sort of order. When the price starts dropping below a certain limit, the broker sells before you lose any more money. See buy stop and sell stop.
You've bought a stock at 43 bucks per share. You were hopeful that the new drug from this company would cure cancer. Instead, it only grew hair on people's knuckles. Wisely, just in case that hair-knuckle thing happened, you had put in a stop loss order with your purchase at $42 to sell everything. When the price reaches $42, the broker starts selling at the next available price, which is $25. You've lost a lot of money, but the next day the stock is at three dollars a share. You got out before your stock bled out all over the floor. Lucky—those things get messy.