What is Stop Loss?

3 min. readlast update: 10.18.2023

Stop Loss is the practice of setting a predetermined price level in advance to reduce the risk of financial losses when buying or selling assets. If the price of the asset falls to the pre-set level, the Stop Loss order automatically works by selling the asset, thus limiting your losses to the level you have specified.

Using a Stop Loss is a financial risk management technique that helps safeguard investments from unexpected market changes, preventing losses beyond what you anticipate. 

It is a valuable tool for traders and investors looking to protect their capital in an ever-fluctuating financial environment.


Example : You bought XAU/USD at the market price of 1820.78 with a leverage of 30 with an amount of $3,000. 

  • The platform automatically set it at 50% (with a rate of 1821.77 and an amount of $2,906.08). 
  • You can set it with a minimum of at least current price -1 point of the amount (with an amount of $22.35). 
  • And a maximum can be set up to 50% of amount(with an amount of $1,499.69). 

You can click How to set a Stop Loss for a buy position on Woxa? and How to set a Stop Loss for a sell position on Woxa? for read before invest.

Advantages and Disadvantages.

Advantages :

  1. Risk Control: Setting a Stop Loss allows you to control the risk in buying or selling assets or commodities by limiting the maximum acceptable loss. This efficiently reduces the risk of losses.
  2. Peace of Mind in Trading: Having a Stop Loss provides you with peace of mind while trading, as you don't have to worry about the potential risks that may arise. You've predetermined the price level you're willing to accept in advance.
  3. Trade Planning: Setting a Stop Loss helps you plan your trades systematically. You can establish target prices in advance, enabling you to have a clear trading strategy.

Disadvantages : 

  1. Cessation of loss: Using a Stop Loss can sometimes lead to cessation when the market moves rapidly, and the price quickly crosses the Stop Loss level you've set, potentially causing you to miss the price you desired. 
  2. Overpassing Losses: Occasionally, a Stop Loss may be triggered when the market rapidly moves up or down in a short period. This could result in you losing money while the market continues moving in the direction you anticipated.
  3. Complexity in Usage: Setting a Stop Loss requires caution when determining the appropriate price level and calculating the quantity to buy or sell. This complexity may lead to personal errors.

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