Your safety net

A stop loss closes your trade automatically at a price you choose, limiting how much you can lose if the market moves against you.

<title id="sl-title">Stop loss and take profit around a buy trade</title> A buy trade is entered at 1.0850. The take profit sits above at 1.0910 and the stop loss sits below at 1.0820, just under a support level. Take profit 1.0910 (+60 pips) Entry (buy) 1.0850 Support zone Stop loss 1.0820 (−30 pips)
The stop sits just beyond support, where the trade idea would be proven wrong. Risk-reward here is 1:2.

Where to put a stop loss

Place it where your trade idea is proven wrong, not at a random number of pips:

  • For a buy near support, just below the support zone.
  • For a sell near resistance, just above the resistance zone.
  • Leave a little room for the spread and normal price noise.

Let the stop decide the position size

Many beginners choose a lot size first and then squeeze the stop loss to fit. Do it the other way round:

  1. Put the stop where it belongs (say 30 pips away).
  2. Decide your maximum loss (say 1% of a $1,000 account = $10).
  3. Calculate the lot size: $10 ÷ (30 pips × $10 per pip per lot) ≈ 0.03 lots.

Rules worth following

  • Set the stop loss when you open the trade.
  • Never widen a stop loss to avoid taking a loss. Moving it closer to lock in profit is fine.
  • Accept that stops will be hit regularly. That is the cost of protecting your account.