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Loss Cut

Also known as a stop-loss order, is a risk management tool used in trading to limit potential losses. It is an order placed with a broker to automatically close a trade at a specified price level if the market moves against the trader's position.

For example, if a trader buys a currency pair at 130.00 and sets a stop loss at 129.75, the trade will automatically be closed out if the currency pair's price falls to 129.75. The trader will only lose a predetermined amount (in this case, 25 pips) on the trade, rather than potentially losing more if the price continues to fall.

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