What it means
A stop-loss is a pre-set price level at which a position will be automatically closed to limit loss. Stops can be hard (specific price) or trailing (follows price up but not down). Typically used in trading rather than long-term investing.
Why it matters
Stops enforce discipline. The single biggest contributor to retail trader blow-ups is letting losers run while cutting winners. Stops force the opposite behavior.
How to use it
Set stops based on volatility (ATR multiples), not on dollar amounts. Place them at levels that, if hit, invalidate the trade thesis. Avoid round-number placement where stop hunts cluster.
Take it further
Want a worked example or a deeper dive? Ask Rocky how this concept applies to your specific watchlist or trade idea.
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