What is stop loss selling?

Answer 1

A stop-loss order is a directive to a broker to sell a security when it falls to a certain point. An example: You bought 1000 shares of Acme common at 18. Acme then rose to 36 on strong sales of instant holes. Instant holes are a great product, but you have an uneasy feeling about them, so you tell your broker "if Acme falls to 32, sell all of it." If this happens, you "stop your loss" by selling the stock. A week later, when Acme fell to 12 on the news Charles Manson used Acme Instant Holes to escape from prison, you're sitting pretty because your broker dumped your entire Acme holding at 32.