Stop Loss Order

A stop loss order can be defined as an order that is placed with a broker to sell the security when it reaches at a certain price. As the name indicates the objective of the stop loss order is to limit the loss of the investor regarding the position of the investor in purchasing and selling a certain security. Most of the investor associate the stop loss order technique with the long term position of the security however some also use this technique for the short term position as well. The short term position means that the security must be bought with the help of the broker when it become trading above the defined price of the security. The major advantage of using a stop loss order is that it removes the emotional factor out of your sales and purchases moreover it is an effective method of selling securities when the investor is not on the point say he or she is at vacations. However the execution of the stop loss order is not always guaranteed by the broker especially in the case when the stock is halted and there is a gap down in the price.

Here we can explain the stop loss order with a long position and the stop loss order with short position. With stop loss order of long position the order to sell the securities is triggered when it is trading below a certain defined price. This kind of order is fruitful if the price of the stock is decreasing in an orderly manner but the decline is not sharp or disorderly.

Other Related Accounting Articles:

• Bid Wanted
• Offering Price
• Unrestricted Cash
• Market Discount
• Direct Bidder
• Savings Account
• Over and Short
• Liquid Asset
• Takeover Bid