What Is a Stop-Loss Order?

A stop loss instruction is an instruction to be executed when the market price reaches the customer's expected price level. With the use of stop loss orders, customers can not only effectively lock profits, but also minimize possible losses, and also establish new positions with less risk. There is currently no such directive in China. ^[1]

Stop Loss Order

A stop loss instruction is an instruction to be executed when the market price reaches the customer's expected price level. With the use of stop loss orders, customers can not only effectively lock profits, but also minimize possible losses, and also establish new positions with less risk. There is currently no such directive in China. ^[1]

Also called stop loss instruction or STOP instruction. When the market price reaches the customer's expected price level, it becomes

How to use this tool to achieve the effect of controlling risks and amplifying profits?

First of all, many of our investors have the concept of risk and stop loss. The price of stop loss is the key price of the STOP instruction. When issuing such a trading order, the investor closed the position with the original position. For example, Mr. Wang bought Shanghai Natural Rubber, which opened 10 lots of 610 contracts, and the transaction price was 25,000 yuan / ton. After the transaction, The price has changed. Considering Mr. Wang s own trading style and risk tolerance, he thinks that when the price drops to 24,200 yuan / ton, the market will break down quickly. In order to avoid the unexpected loss of orders at the time, he passed the trading system. Place a closing order and sell 10 lots of 610 contract Shanghai Tianjiao. The price is 24200 yuan / ton. The order is a stop loss order [STOP]. After this order is issued, the market will hit 24200 or drop below the day. The price of 24200, the order will automatically reach the transaction in the exchange system in the first time, otherwise, the market did not touch or penetrate the price of 24200, the order will not be traded on the same day.

Secondly, the effect of the STOP instruction is very different from the existing trading instructions in China. The existing trading instructions belong to the ORDER instruction, which is the limit price instruction. This type of instruction requires that the transaction condition is that the purchase order transaction must be at a specified price or lower. The specified price, the sell order transaction must be the specified price or higher than the specified price, and the principle of good price is implemented. According to this principle, if Mr. Wang's closing order in the above example is used as the principle of close price, then Regardless of whether the price was 24800 or 25100 at that time, the order would be immediately executed at the current price, which would not have the effect of closing the stop loss at all; the STOP stop loss order is a condition-triggered trading order that does not meet a certain For a specific condition, the order will not be concluded based on the principle of preferential prices. When the original set conditions appear, the order will be prevented in advance based on the principle of time priority. Therefore, one of the most basic tasks that every trader did when introducing foreign futures in China was to issue a new order to the market, and at the same time, issue a STOP order to the trading system.

In addition, the STOP stop loss instruction is essentially an investor's trading instruction temporarily deposited in the trading system of the exchange. For investors, it effectively reflects the effect and purpose of controlling risks in advance. In fact, the investor s Many times, trading risk is not that they do not have the concept of risk awareness and stop loss in their minds, but that they have not implemented the original stop loss plan when they have reached the price of the stop loss. Fortunately, after the STOP position and stop loss order was launched , Then