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Stop Loss

Predefined exit level designed to cap downside risk by closing a position if the market moves adversely.

A stop loss (SL) is a risk management tool that automatically closes a trading position at a pre-determined price to limit potential losses. It protects capital from adverse market movements.

For example, a trader holding a long WTI position at $85 per barrel may set a stop loss at $82. If the market falls to $82, the position closes automatically, preventing further loss.

Stop loss orders can be fixed, trailing, or contingent, and are essential in volatile markets. They provide discipline, reduce emotional trading, and protect both short- and long-term capital.

Effective use of stop loss orders allows traders to manage risk, optimize position sizing, and maintain consistent performance across commodities, equities, and derivatives markets.

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