What's stop loss is ?

Stop loss ?

A stop loss is an order set to limit the amount of money you are willing to lose during a trade.

It's an order placed to buy or sell once your asset reaches a certain price.

It's used in risk management application, to prevent the loss of average 10% of your position.

Take this as example : 

You bought Ethereum for $100, you want to accept the possibility of losing no more than 10% of your position. So, you set up a sell order at $90. If the price reaches $90, you'll lose 10% of your position. If the price continue to fall, say $70, you prevented losing 30% of your position. This is called risk management and this is why you need to use stop loss.

What if price didn't fall and continue to climb ?

You are making money. But keep in mind that you make money only when you close your position, aka "Take profit".

One of a good strategy is : when the price continue in the direction your position is, raise the stop loss in the goal of making money even if the price touches your sell order.

Why do I need to use stop loss ?

Most of beginner don't know what's stop losses are and don't use them, but they are critical to make money and prevent to lose all your capital in a fraction of second. It also permit you to lock your profit too by raising the stop loss when the price is favorable for you.

It's designed to limit your loss in case of unfavorable move (move against you).

What are risk of using them ?

The risk is to lose money on a price fluctuation against your position, like a quick move with a long wick. Your stop loss can trigger and your position will be closed and you'll lose your money.

This is also called "stop hunting" : market makers can know where positions were built and liquidate them to make profit, on a little moves, if you are using high leverage you can be liquidated stupidly on these kind of moves.