Info 1: stop loss definition
Info 2: how stop loss works
Info 3: stop loss vs close trade
Info 4: example of stop loss.
Opening information:
Stop loss breaks into two words stop and loss, stop means nil or end one of the things or activities, loss means dropped in value.
Stop loss means end of the thing of drop in value of one item, so now let’s have a look what is a stop loss, how the stop loss works in the margin, and what is the difference between the stop loss and close trade, finally one clear example about the stop loss.
Info 1: stop loss definition
Mr.Tageran is a real estate business owner who holds and maintains 21 billion dollars in estate by having his own business.
He started the Industry the 36 years and it’s a not one day goal, it takes him a hundred and more than thousands days to build such kind of big large giant amount company in real estate.
Moreover Tageran didn’t have any big courage amount of business insurance despite he put insurance to protect all the assets he owns already.
When he forwards the total insurance coverage amount, the insurance company won’t accept the whole risk in spite of they only agreed to take the risk of 15 billion dollars.
Obviously, this stated that any amount with are loss above 15 billion dollars is not covered in insurance. Suppose the loss occurs the tageran business is the one which is responsible for the entire business.
Here Mr.Tageran business will not lose the amount of more than 6 billion of covered insurance risk. This 6 billion is a stop loss in the Tageran business. Now let’s dive into how the stop loss works and is involved in the public market.
Info 2: how stop loss works
Stop loss doesn’t represent any of the specific amount of objects or things, instead, they are margin that stops to reduce the loss from the Invested amount.
Therefore any of the things of line which are used to mark as margin in the trading to stop the loss from the any kind of Securities investment, then such line are what considered as stop loss in the stock market.
In the public market, this stop loss works in a more complex manner in which each trading takes place in the investment account.
If any of the person who trade the stock using their own money with stock trading, stop the loss from the straight margin, such margin is known to be a stop loss.
Next, the traders or fund managers who are involved in the trading of commodities take the margin as very sincere, once the margin of stop loss has been created, then such margin could become a stop loss.
it could be changeable at any level based on our own wishes. Because stop loss is not a fixed thing instead it’s a line of margin that could be used to trade and stop removing the amount from your trading account.
people who are trading the currencies with multiple margins with multiple pairs, then each position of trade allows such Investors or traders to create the margin to stop the account blowing from a particular position.
On any position in which the trade takes place Which are not necessary to have a margin for stop, but it’s dangerous to keep the position open without the entire, which is a high chance it will blow the entire money without creating for stop loss margin.
Obviously the stop loss is the word which used as margin in all the margin and more advanced accounts for trading.
Most of the people’s confuse the the stop loss and close trade, so lets jump into know the key difference in it anyway.
Info 3: stop loss vs close trade.
The difference between the stop loss and close trade are, stop loss are the one which are used to Nil the activities of one things by closing the trade.
On the other side, close trade are the one which are not a stop loss margin instead it’s option of choice to close the Current trade if it’s profits or loss no matter what.
So the key difference among the stop loss and close trade are stop loss is margin and close trade is option to complete the trade.
To make you more clear about the stop loss lets seen into one brief example.
Info 4: example of stop loss
Say you opened one position on the stock H, the price of Stock H is 24 dollars and you had created or set the margin to not lose the money below than 15 dollars and take profit at 34 dollars.
Here the margin which are created on the 15 dollars are what considered as stop loss.