How do stop-loss limits work
A stop-loss limit allows you to specify the minimum price at which you are willing to hold a stock and trigger the sale of the shares when they reach, or fall below, the price you've set. With The Share Centre limits can be:
- Set free of charge
- Used for 1 trading day or up to 365 days
- Applied to some or all of your shares
What price should I set my stop-loss limits to?
It's important you regularly monitor and review your investments and set your stop-loss limits based on your investment strategy and risk.
To help you, we publish our risk rating of each FTSE100 share on the website and recommend you set a stop-loss limit based on the risk of the share:
- Low risk – 12.5% stop-loss
- Medium risk – 15% stop-loss
- High risk – 20% stop-loss
To view our analysis on each FTSE 100 share click here.
Example 1 - to minimise your losses when you buy shares
You buy a share for 105p. If you set a stop-loss limit at 100p when you buy, the share will be triggered to be sold when the price drops to or below that point, allowing you to minimise your losses.
Example 2 - to ensure a profit when reviewing your 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 approximately a 25p gain on each share. In this instance you would set a stop-loss limit of 130p (105p purchase price plus 25p gain) and ensure a profit.
Will the share be sold at the limit you set?
Not necessarily. The limit you set is a trigger for the share to be sold but it can take some seconds for the deal to go through, during which time the price may change up or down, particularly during volatile market conditions or with shares which have high liquidity.
There could also be occasions when the share price drops straight through the limit you set. If this happens the sale would take place at the appropriate market price, not at the limit price.