This starting point is critical because it is essential at this point for those who will deliver the technology, those who will use that technology, and those who have a stake in the project to reach agreement on its concept and definition. The process is represented in the figure below.
DEFINITION of 'Stop-Loss Order'. An order placed with a broker to sell a security when it reaches a certain price. A stop-loss order is designed to limit an investorâs loss on a position in a security. Although most investors associate a stop-loss order only with a long position, it can also be used for a short position, in which case the security would be bought if it trades above a defined price.
A stop limit order to sell becomes a limit order, and a stop loss order to sell becomes a market order, when the stock is bid (National Best Bid quotation) at or lower than the specified stop price. Note, however, that some market makers may apply the guidelines for listed security stop orders to OTC securities.