What is a stop-loss order?

A stop-loss order is designed to limit how much you lose on an open position by automatically triggering an exit once the price hits a level you’ve set in advance. You define a trigger price, and once the market touches that level, the order activates and gets sent to the exchange, either as a market order (called stop-loss market, or SL-M) or as a limit order at a price you’ve also specified (called stop-loss limit, or SL-L). It’s important to understand that a stop-loss doesn’t guarantee your exact exit price, only that the order gets triggered and sent once the trigger level is hit; in a fast-moving or gap-down scenario, the actual execution price can be meaningfully worse than the trigger, especially with an SL-L order that might not fill at all if the price blows through the limit. You use stop-loss orders as risk management, but you still monitor open positions rather than assuming the stop-loss guarantees a clean exit at your chosen level.