Stop loss
A stop loss is an automatic loss-taking exit level, set before entering a position, which caps each trade's risk at a predetermined amount.
The stop loss is the order that embodies a decision made calmly in advance: “if price reaches this level, my scenario is invalidated, I am out”. Technically, it is a trigger order placed below the entry price for a long position (above it for a short). Its role is not to be right, but to cap the loss: every trade starts with a known risk, which makes the entire rest of risk management possible : position sizing, risk/reward ratio, expectancy.
Placing a meaningful stop
A good stop sits at the level that invalidates the analysis (below a support, below a recent low, on the other side of an Ichimoku cloud, or at a volatility-proportional distance (a multiple of ATR)) never at an arbitrary percentage applied identically to every asset. Too tight, it gets hit by noise; too wide, it unbalances the risk/reward ratio. In Screener.Trading, you can test the effect of different stops in the backtest and practise executing them in paper trading through TRIGGER orders, without risking capital.
Moving your stop to “give room” to a losing position amounts to removing your protection exactly when it matters: the level set before entry is the right one.
Keep exploring
- FeaturePaper trading: learn in real conditions, without the riskPlace orders, manage positions and track your P&L on fully virtual accounts : real trading practice with zero real money at stake.
- FeatureThe backtesting tool built into your screenersBacktests built from your screeners: entries, exits, fees and full metrics to judge a strategy on numbers instead of gut feeling.
- IndicatorATR (Average True Range)The reference indicator for measuring volatility: it tells you how much an asset moves per candle on average, saying nothing about direction.
- GlossaryTake profitA take profit is an automatic profit-taking exit level, set before entering a position, which locks in the gain when price reaches the intended target.
- GlossaryTrigger orderA trigger order stays dormant until price reaches a defined threshold, then executes, making it the tool of choice for protective stops and breakout entries.
- GlossaryRisk/reward ratioThe risk/reward ratio compares a trade's targeted gain with its accepted loss, and together with the win rate determines whether a strategy has positive expectancy.
- GlossaryPosition sizingPosition sizing is the share of capital committed to a trade, calibrated so that the loss if the stop is hit remains a controlled fraction of the account.
- GuideThe complete beginner's guide to tradingEverything you need to understand before placing your first order: reading a chart, choosing your style, using the right indicators, managing risk, and practicing without risking a cent.
- GuideBacktesting a trading strategy, step by stepBefore risking a cent, replay your strategy on historical data: backtest setup, reading the key metrics, and the traps of over-optimization.