What is "stop loss" in investment?

A stop-loss order is an order a person places with a broker to sell a stock after it reaches a certain price point. The goal is to minimize losses on a stock position by automating the sale and closing of the position.

Traders sometimes enter stop-loss orders at the same time they buy stocks, removing the emotion of selling these stocks at a loss. Offering an exit price at the time of order allows for a predictable loss when the stock price doesn't appreciate. On a purchase at $7.50, a stop-loss order at $7.30 limits the loss to 20 cents per share.