Understanding Stop-Loss Orders in Risk Management

Very Easy Risk Management Managing Market Risk

Alice is a financial advisor who manages a client's diversified investment portfolio. The client is concerned about potential market volatility and has expressed interest in risk management strategies. Alice is considering implementing a stop-loss order for one of the client's equity investments to mitigate risk.

A stop-loss order is a popular risk management tool that can help limit potential losses when market conditions are unfavorable.

A stop-loss order is a price limit set to automatically sell an asset at a specified lower price.

A stop-loss order guarantees that the asset will be sold at the specified lower price.

A stop-loss order allows an investor to capitalize on rising asset prices without any risk.

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