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Stop loss

The goal of this order is to sell a security at a pre-defined level of loss or to complete a trade for a security at a pre-defined price.

Example of use:

Sell order:

The Investor attempts to secure purchased securities so that their sale occurs at a predefined maximum allowable loss level.

Buy order:

The investor wants to buy securities at a predetermined purchase price. A majority of such orders are motivated by signals that come from technical analysis (e.g. buy above the resistance level). Another example is the protection of short positions from larger than acceptable losses.

Placing an order:

An investor bought a security at EUR 10.00 and is prepared to leave this position with acceptable losses at 5%. In this case the investor places a sell order where "Quantity" and "Order Validity" are filled in and the price at which the investor wants to sell the securities at in the event the price drops is entered into "Stop Price (EUR). In our case (a 5% drop), EUR 9.50 is entered.

It is also a good idea to fill in "Price (EUR), e.g. at EUR 9.00 (after the Stoploss order is activated at EUR 9.50, in the worst case the order will be settled at this value - if nothing is entered, the order will be placed as a market order and settled at any price).

If the price drops to EUR 9.50, the Stoploss order is activated and realized at the current best bid (up to the Limit Price entered in the Stoploss Order, in our case EUR 9.00 as entered into "Lower price (EUR).

If the price of the security changes quickly (e.g. the announcement of price-influencing information) a situation occurs where the market price moves outside the range entered by the investor and the Stoploss order will be created with a delay. When using a Bracket order, the investor is aware of the fact that the broker has no responsibility for damages caused by this technical delay in the reaction of the order to market conditions.


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