A stop-loss is an order placed with a broker to buy or sell a security once it reaches a predetermined price, designed to limit an investor's potential loss on a position.

Importance of Stop-Loss:

1. Risk Management: By setting a predefined exit point, stop-loss orders help to cap losses, thereby effectively managing risk on any trade.

2. Emotion Control: They eliminate emotional decision-making by automatically executing the sale of a security at the specified price, helping investors adhere to their trading plan.

3. Protection in Volatile Markets: In highly volatile markets, a stop-loss order can safeguard against substantial losses caused by sudden market shifts.

4. Time Management: This tool enables investors to manage their daily routines without needing to constantly monitor their positions, as the stop-loss order executes automatically when conditions are met.

5. Discipline: Implementing stop-loss orders fosters a disciplined investing approach by requiring investors to set clear exit strategies.

Overall, stop-loss orders are essential for maintaining control over investments and minimizing potential losses.

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