For example: You open a transaction to sell EUR / USD (euro against dollar). You earn, if the euro falls, and as applicable, you bear losses, if the euro rises. “Stop loss” ensures that your loss will not exceed the amount you specified. At the moment when your loss is equal to that amount, the transaction will be closed automatically, even if you are not near a computer.
For the “Buy” transaction the price level of “Stop loss” is set below the order price; for the “Sell” transaction the price level of “Stop loss” is set above the order price. The price levels for stop-losses are usually determined by the maximum (sell transaction) or minimum (buy transaction) price of this or the previous trading day.