What is an example of a stop-loss order?

A stoploss order is a crucial tool for traders to manage risk and minimize potential losses. It is an order placed with a broker to buy or sell a security once it reaches a specific price point.

The purpose of a stoploss order is to automatically execute a trade and limit the downside risk if the market moves against the trader's position. This helps traders to predefine their acceptable level of loss and avoid emotional decision-making.

The stoploss price is typically set below the current market price for a long position (buy) or above the current market price for a short position (sell). Once the stoploss price is reached, the order becomes a market order and is executed at the best available price.

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For example, let's say a trader purchases a stock at ₹100 per share and decides to set a stoploss at ₹95. If the stock price falls to ₹95 or below, the stoploss order will be triggered, and the stock will be sold automatically to prevent further losses.