Stop-Loss Practice
A stop-loss is your pre-agreed exit when you are wrong. The skill is placing it where the chart says your idea has failed — then sizing the trade around that distance.
A stop-loss is an order (or a rule) that closes a losing trade at a set price. A good stop sits just beyond a level that, if broken, means your reason for the trade is gone — below support for a long, above resistance for a short. The distance to that level then drives your position size.
How to spot it
- ✓ Find the price that would prove your idea wrong.
- ✓ Place the stop a little beyond it, allowing for normal noise.
- ✓ Measure the distance from entry to stop — that is your 1R.
- ✓ Size the position so 1R equals a small, fixed fraction of your account.
- ✓ Once set, respect it — do not widen a stop to avoid being wrong.
⚠️ Common mistake
Placing the stop at a round dollar amount instead of a chart level, then moving it when price approaches. A stop you keep widening is not a stop — it is a wish.
FAQ
How wide should my stop be?
Wide enough to survive normal noise, tight enough to keep risk small — defined by the chart level, not a fixed percentage. Then size around it. This page is practice, not advice.
Should I use a mental stop or a hard order?
A resting order removes the temptation to hesitate, but execution style is personal. The non-negotiable part is having a level decided in advance. Not financial advice.