Stop-loss is a conditional trading order designed to automatically close a position when a specified price level is reached.

For a long position, a stop-loss is generally placed below the current price. For a short position, it is generally placed above the current price. When the trigger level is reached, the stop order activates according to its configured execution type.

Example

A trader buys BTC at $60,000 and sets a stop-loss at $57,000. If the market reaches the trigger level, the system initiates a position-closing order. If the stop becomes a market order, the final execution price may differ from $57,000.

Limitations

A stop-loss does not guarantee execution at the exact specified price. Rapid market movement, low liquidity, or price gaps can cause slippage.

Stop-loss is a risk-management tool, but it does not eliminate market risk.