A stop-loss is a standing order to sell an asset once it falls to a price you set in advance. Its purpose is to cap a loss automatically, so a position cannot quietly bleed far beyond the point at which you decided you were wrong.
It is protection, not a guarantee. In a fast-moving or "gapping" market the sale can execute well below the trigger price, and a stop set too tight can be hit by ordinary noise — "whipsawed" out of a position just before it recovers. Choosing the level is a balance between room to breathe and loss containment.
A stop-loss works best as one part of a plan that also sets how large the position is in the first place. Sizing and stops together define the most you can lose on a trade before you ever enter it.
Worked example
A stop-loss set at $90 on a stock bought at $100 aims to limit the loss to about 10% if the price falls.
Related guides
This definition is general education, not investment advice. Markets — especially crypto — are volatile and you can lose money. Please read our disclaimer and see our methodology.