Stop-loss and take-profit orders

Stop-loss and take-profit orders are types of orders commonly used in financial trading to manage risk and lock in profits.

A stop-loss order is an order placed by a trader to sell an asset at a specified price in order to limit the loss on a trade. This is typically used to protect against a sudden price drop in an asset. For example, if a trader buys a stock at $50 and sets a stop-loss order at $45, the order will be triggered if the stock price drops to $45 or below, limiting the trader’s loss on the trade.

A take-profit order is an order placed by a trader to sell an asset at a specified price in order to take profits on a trade. This is typically used to lock in gains when a trader believes that the asset has reached a target price. For example, if a trader buys a stock at $50 and sets a take-profit order at $60, the order will be triggered if the stock price reaches $60 or higher, allowing the trader to lock in profits on the trade.

Both stop-loss and take-profit orders can be used in combination with other trading strategies to manage risk and maximize profits.