A Stop-Loss is an order placed with a broker to sell a stock when it reaches a certain price. The stop-loss is designed to limit an investor's loss on a security position.
Another name for Stop Loss is "stop order" or "stop-market order".
Setting a stop-loss order for 5% below the price you paid for the stock will limit your loss to 5%. This strategy allows investors to determine their loss limit in advance, preventing emotional decision-making.
It's also a great idea to use a stop order before you leave for holidays or enter a situation in which you will be unable to watch your stocks for an extended period of time.
It's preferrable that maintain a 'mental stop loss'. In order words, instead of showing your hands, you keep a visual stop loss and once you reach that percentage, you will close your position yourself.
Stop Loss will not protect your position after hours or pre-market.
