A stop loss in trading is a risk management tool that automatically closes a trader’s position when the price of an asset reaches a predetermined level, limiting potential losses. It helps protect capital by preventing small losses from turning into significant financial setbacks, especially in volatile markets such as forex, stocks, or cryptocurrencies. Traders can set stop-loss orders based on technical analysis, support and resistance levels, or a fixed percentage of their account balance. By using stop loss effectively, traders maintain discipline, manage risk, and protect their trading account from unexpected market fluctuations.