Stop Loss: What It Is, How It Works and How to Set One
A stop loss is an order that closes an open trade automatically at a price you set in advance to limit losses. On a long position (a buy trade that gains when price rises) the stop loss sits below the entry price, and on a short position (a sell trade that gains when price falls) it sits above it.
For forex and CFD traders—especially intermediate to advanced retail traders using MetaTrader 4 or MetaTrader 5—a stop loss is a core risk-management tool in leveraged markets, because it helps protect capital, supports position sizing, and reduces emotional exit decisions when prices move fast. This guide explains what stop losses are, how they work, the main order types, how to set and place them, their risks and limitations, common mistakes, and answers to frequently asked questions. A stop loss does not remove risk, and slippage can mean the final exit price differs from the trigger price, but it helps limit losses and manage risk before the trade starts, particularly when using leverage.
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