A stop loss is a planned invalidation point, not a prediction. Learn how to set exits around the trade idea and risk limit.
Key Takeaways
A stop loss is the point where your reason for being in a trade no longer holds. It gives risk a boundary before emotions get involved.
Set the stop from market structure or your setup rules, then calculate position size from that distance. Do not place it only where a dollar amount feels comfortable, then move it when price approaches.
A stop does not guarantee an exact fill in volatile conditions. It does make the decision explicit. Combine it with a planned risk-reward ratio before entry.
Sources
FAQ
No. Fast markets and gaps can cause fills away from the chosen stop level.
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