Stop Losses

Stop losses

Every trader, no matter how skilled, has losing trades. Stop losses help you manage risk and keep your losses small when a trade doesn't go your way.

A stop loss is a trigger to close out an open position in case the market moves against you. It's one way to prevent large losses and control your risk. Each trader has stop losses, whether they realize it or not. You should have them too—don't get caught without one!

If you are using an automated trading solution, set stop losses to help you control how much money you lose in a bad trade. This will allow you to keep your capital and continue trading in the long term. Avoid setting stop losses randomly. If you are setting a fixed stop loss, place them behind one or more areas of probable support/resistance. If the market you are trading is more volatile, you may place your stop losses a little further away to compensate for that volatility.

You will have both winning and losing trades. Stop losses can help you manage risk, cut your losses, and continue trading.