Minimize Your Loss With “Stop Loss” While Trading

Day traders use several different orders to enter and exit their trades, and one of these orders are stop loss order. A stop loss is an exit order that is used to limit the amount of loss that a trader will take on a trade, if the trade goes against them. Stop loss orders are always used to exit trades, and are always used to limit the amount of loss, but some day traders use them as their only exit, while other traders use them as a backup exit only. These two types of stop loss are as follows:

i. Regular Exit:
When a stop loss is used as the only exit, it is kept close to the current price, at the maximum loss that the trader is willing to accept for a normal trade.

ii. Backup Exit:
When a stop loss is used as a backup exit, it is known as a crash stop loss, or an emergency stop loss, and is kept farther away from the current price, so that it is only filled as a last resort (i.e. if no other exit order can be filled).