A Stop Loss is an order to close a trade when the market moves a specified amount against the position. For example, if a trader longed EURUSD at 1.2500 and was only prepared to lose 15 pips, a stop position would be set at 15 pips below the current market price at 1.2500 - 0.0015 = 1.2485.

The purpose of setting up a stop loss order is to put a "safety net" on transactions. Without a stop, a trader could potentially lose all his funds if the trade went against them. A stop position reflects a trader's "pain point," where the market has turned so far against him that he needs to exit his position. As a result, stop orders are useful for money management in controlling losses, helping to ensure a trader is controlling their risk exposure.