Stop Loss Orders - Market or Limit?

Stop loss orders are designed to limit the amount of money that a trade can lose, by exiting the trade if a specific price (that is against the trade) is reached. For example, a trader might enter a long trade at 4,000, and place a stop loss order at 3,950. If the price goes against the trade and reaches 3,950, the stop loss order will be filled, which will exit the trade, thereby limiting the loss to 50 points.

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