Protective stop

Say you buy 20 shares of a company at $30 — $600 in total — and you decide up front that you’re not willing to lose more than about $100 of it. A protective stop at $25 is that decision written down somewhere that will act on it even when you’re not looking. If the price touches $25, the shares are sold, and you’re out roughly $100 rather than whatever the company does next.

A stop won’t make you money. What it does is turn an open-ended question — how far could this fall while I’m asleep, or in a meeting, or busy persuading myself it’ll come back? — into a fixed number you agreed to while you were still calm about it. That turns out to matter enormously, because the moment you most need that decision is the moment you’re least able to make it.

Where your broker can hold the stop, BotStock puts it there. That means it keeps working even if the engine is stopped, your laptop is shut, or your session has expired. Where the broker can’t, BotStock manages the stop itself — which only works while the engine is running. Each position’s protection badge tells you which kind you’ve got.

One honest caveat: a stop is an instruction to sell once a price is reached, not a promise about the price you’ll get. If a stock gaps straight from $27 to $22 overnight, your $25 stop sells at around $22. Most of the time the difference is small. Occasionally it isn’t.