Prices sometimes move against what an investor expected. Deciding in advance on a rule — such as "sell if the share price falls a certain percentage below the purchase price" — and then following that rule when selling is what is referred to as a stop-loss.
The idea behind a stop-loss
Because a stop-loss locks in a loss, it can be psychologically difficult to carry out, but it is positioned as a risk-management technique for preventing further loss. Some investors also use a pre-set sell order (a stop order) to establish the sale price in advance.
Points to keep in mind
Setting an overly strict stop-loss threshold can mean selling right before a temporary dip recovers. On the other hand, continuing to hold without any threshold at all risks letting a loss grow larger. It is important to think through a rule that fits your own risk tolerance in advance.