Stop-Loss

A stop-loss is a price you set in advance to close a position if a trade moves against you, so the decision is made before emotions are involved. Its job is to cap how much a single trade can lose before you ever enter it. A hard stop is a standing order with your broker that triggers automatically; a mental stop is a level you've decided on without submitting an order, relying on closing the position manually instead. Stops are often sized using ATR so the distance reflects that stock's normal volatility rather than one arbitrary percentage for every trade — though a stop only protects you under normal conditions, since a stock can gap down overnight past your stop and execute at a worse price.