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Stop-Loss Orders - An Example

(For simplicity, the example below does not include commissions)


A team purchases 10,000 shares American Beverage Corp (ABC) for $20 with a Stop-Loss order of $15 on Turn 5.  As long as the stock remains above $15, the stock will remain in the team's portfolio.

Many turns pass, with the price of ABC moving between $20 and $30, when it begins to fall.

By turn 21, the price finally drops below the $15 Stop-Loss order, and the stock is sold without the team needing to find a trader to issue a sell order.

Note: A Stop-Loss is subject to commissions, just as any sale transaction.