How does a Stop Loss work?

A Stop Loss is a Market Order that helps limit an investor's losses.

When you attach a Stop Loss to one of your trades, you basically give instructions to close the trade once it reaches a certain price.

Example:

You buy a Stock at the price of $100.

By attaching a Stop Loss at the price of $80, you basically instruct the system to close your order once the price reaches that price.

Attaching a Stop Loss to your trades is the most efficient way of risk management and to cut losses when you don't have the ability to constantly monitoring your trades.