By setting a stop loss on your investment, you can minimise potential losses or guarantee profits by automatically triggering a sale when they reach or fall below the price you've set. The order will trigger at your set limit (in pence) and sell at the 'best price'. The trigger is not a guarantee and the shares can be sold above or below your trigger price.
Example 1: Minimising losses when buying shares
You buy a share for 105p. If you set a stop loss at 100p when you buy, a sale will be triggered when the price drops to or below that point, allowing you to minimise your losses.
Example 2 - Ensuring a profit when reviewing shares
You bought a share for 105p. You review your investments every week and notice that its current price is 150p. While you don't want to sell the share now, having made a profit of 45p, you want to ensure you get at least 25p gain on each share. In this instance you would set a stop loss of 130p (105p purchase price plus 25p gain) to ensure your profit.