It is an order placed with a broker to buy or sell once the stock reaches a certain price. A stop-loss is designed to limit an investor's loss on a security position. Setting a stop-loss order for 10% below the price at which you bought the stock will limit your loss to 10%. For example, let's say you just purchased Microsoft (Nasdaq:MSFT) at $20 per share. Right after buying the stock you enter a stop-loss order for $18. This means that if the stock falls below $18, your shares will then be sold at the prevailing market price. (For further reading, see A Look At Exit Strategies.)


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