What is a trailing stop with a stop-loss order?

A stop-loss order limits your exposure to less of a loss than you might otherwise experience by automatically closing out your position if your stock trades to an unfavorable market price level that you designate. If you use a trailing stop with your stop-loss order, that protection can move with your position even as it increases in value.

What are the benefits of a stop-loss order?

Key Takeaways 1 Most investors can benefit from implementing a stop-loss order. 2 A stop-loss is designed to limit an investor's loss on a security position that makes an unfavorable move. 3 One key advantage of using a stop-loss order is you don't need to monitor your holdings daily. More items...

What is a stop loss order?

Key Takeaways. A stop-loss order, also known as a stop order, is an order which specifies that a stock be bought or sold when it reaches a specified price known as the stop price. Once the stop price is met, the stop order becomes a market order and is executed at the next available opportunity.

What are the negative aspects of stop-loss?

The one negative aspect of stop-loss is if a stock suddenly gaps lower below the stop price. The order would trigger, and the stock would be sold at the next available price even if the stock is trading sharply below your stop loss level.