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The AI (ChatGPT) Stock Investing Handbook: Stop-Loss Order

Here is the response from ChatGPT for the prompt stop-loss order 150 words entered on February 11, 2023

A stop-loss order is a type of order placed with a stockbroker to sell a security when it reaches a certain price. This is a risk management tool used by investors to limit potential losses on a security position. When the security's price hits the specified "stop" price, the order becomes a market order and is executed at the next available opportunity, regardless of the market price at that time.

Stop-loss orders are typically used in an effort to limit an investor's potential losses. For example, if an investor buys a stock at $100 and sets a stop-loss order at $95, the order will automatically trigger a sale of the stock if the price falls to $95. This way, the investor is able to limit the potential loss on the position to $5 per share.

It's important to note that stop-loss orders do not guarantee a certain price for the sale, as the market price at the time of the execution could be lower or higher than the stop price. Additionally, rapid market movements could result in the stock being sold for a much lower price than the investor intended.

In summary, a stop-loss order can be a useful tool for managing risk in a portfolio, but it's important for investors to understand its limitations and use it as part of a larger investment strategy.


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