What Is a ‘Stop-Loss’ Order and How Does It Protect against Sudden Crashes?

A stop-loss order is an instruction to automatically sell an asset when its price falls to a specified level. It is a risk management tool designed to limit an investor's potential loss on a security position.

In a sudden 'dump' following a pump, a pre-set stop-loss can trigger quickly, selling the asset before the price hits the bottom, thus minimizing the overall financial damage.