A stop-loss is a risk management tool used in trading to limit potential losses on a trade or investment. It is an order placed with a broker or trading platform to automatically sell or close a position once the asset's price reaches a specified level. The primary purpose of a stop-loss order is to protect traders and investors from significant losses in case the market moves against their positions.

Here are key points about stop-loss orders:

Definition: A stop-loss order is an order to sell an asset when its price falls to or below a specific trigger price, known as the stop price.
Risk Management: Stop-loss orders are a crucial component of risk management strategies. They help traders define their maximum acceptable loss on a trade.
Trigger Price: The trigger price is the price level at which the stop-loss order becomes a market order. Once the market price reaches or goes below the trigger price, the stop-loss order is executed at the best available market price.
Automatic Execution: Stop-loss orders are typically executed automatically without the need for manual intervention. This ensures a quick response to adverse market movements.
Types of Stop-Loss Orders:
- Market Stop-Loss: Triggered at the best available market price once the stop price is reached.
- Limit Stop-Loss: Triggered at the specified stop price but executed at a specific limit price or better.
Volatility Considerations: In highly volatile markets, the execution price of a stop-loss order may deviate from the trigger price. This is known as slippage and can occur when market conditions change rapidly.
Trailing Stop-Loss: A trailing stop-loss is a dynamic order that adjusts as the asset's price moves in a favorable direction. It is set at a fixed percentage or amount below the highest price reached since the order was placed.
Long and Short Positions: Stop-loss orders can be used for both long (buy) and short (sell) positions. For long positions, the stop-loss is typically placed below the entry price, while for short positions, it is placed above the entry price.
Psychological Impact: Implementing stop-loss orders can help traders overcome emotional decision-making, as it provides a predefined exit strategy in case of adverse market movements.
Usage in Different Markets: Stop-loss orders are used in various financial markets, including stocks, forex, commodities, and cryptocurrencies.

It's important for traders and investors to carefully consider their risk tolerance and market conditions when setting stop-loss levels to strike a balance between limiting losses and avoiding premature exits due to market fluctuations.