Stop Loss and Take Profit are pending orders that help limit losses and lock in profits, respectively. This type of pending orders is frequently used in various automated trading strategies. On a price chart, these pending orders are represented by horizontal lines corresponding to the execution price of these orders. Here's how it looks in practice:
As you can see in the image above, for the market order BUY, there are pending Stop Loss orders (below) to limit losses and Take Profit orders (above) to secure profits.
In some automated trading strategies, Stop Loss orders are not utilized (strategies employing averaging-down and martingale tactics). In such strategies, the trader's losses are not restricted. However, these strategies are very popular among traders because they can yield significantly more profit than expert systems with strict money management rules.
