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An investor is stopped out of a position when a position is liquidated due to a stop order or a stop-limit order. A stop or stop-limit order eliminates emotions of fear or greed when an order is automatically stopped out at a predetermined price. An investor may be stopped out of a position with a pre-detrmined profit or the investor may be stopped out of a position with a planned and acceptable loss. In the case of a long position, an investor is stopped out through the sale of a stock. In the case of a short position the investor is stopped out through the purchase of off-setting shares. For those investors who correctly employ stop and stop-limit orders, being stopped out of a position can be an important part of an overall strategy. |
