Setting Stop Losses

A stop loss is your most important risk management tool. This tutorial covers different stop loss strategies, when to use each type, and best practices for protecting your trading capital.

Why Stop Losses Matter

The Mathematics of Losses

As losses increase, recovery becomes exponentially harder. Stop losses keep your drawdowns manageable.

Benefits of Using Stop Losses

• ✅ Limits losses on individual trades
• ✅ Protects capital for future opportunities
• ✅ Removes emotion from exit decisions
• ✅ Enables position sizing calculations
• ✅ Allows for leverage usage safely

Types of Stop Losses

Fixed Price Stop

Set at a specific price level that invalidates your trade idea.

When to Use:

• Technical invalidation points (below support, above resistance)
• Defined risk scenarios
• News trading with known risk

Example:

Long EURUSD at 1.1000
Support level: 1.0950
Stop Loss: 1.0945 (5 pips below support)
Risk: 55 pips

Fixed Pip/Point Stop

Set at a fixed distance from entry regardless of market structure.

When to Use:

• Scalping strategies
• Consistent risk per trade
• High-frequency trading

Example:

Strategy: 20-pip stop on all trades
Long EURUSD at 1.1000
Stop Loss: 1.0980 (20 pips below entry)

Percentage-Based Stop

Risk a fixed percentage of your account per trade.

Formula:

1Stop Distance = (Account × Risk %) / (Position Size × Pip Value)
2
3Example:
4Account: $10,000
5Risk: 2% = $200
6Position: 0.5 lots (Pip value: $5)
7Stop Distance = $200 / (0.5 × $10) = 40 pips

When to Use:

• Professional risk management
• Scaling with account size
• Maintaining consistent risk

ATR-Based Stop

Uses Average True Range to adapt stop distance to market volatility.

Formula:

1Stop Loss = Entry Price - (ATR × Multiplier)
2
3Example:
4Long EURUSD at 1.1000
514-period ATR: 0.0060 (60 pips)
6Multiplier: 1.5
7Stop Distance: 60 × 1.5 = 90 pips
8Stop Loss: 1.0910

When to Use:

• Trend following strategies
• Different market conditions
• Avoiding noise-based stops

ATR Multiplier Guidelines:

Trailing Stop

A stop that moves with price to lock in profits.

When to Use:

• Trending markets
• Let winners run
• Momentum strategies

Example:

1Long EURUSD at 1.1000
2Initial Stop: 1.0950 (50 pips)
3Trailing: 50 pips
4
5Price moves to 1.1050 → Stop moves to 1.1000 (breakeven)
6Price moves to 1.1100 → Stop moves to 1.1050 (+50 pips locked)
7Price moves to 1.1150 → Stop moves to 1.1100 (+100 pips locked)
8Price reverses to 1.1095 → Stop triggered at 1.1100 → Profit: 100 pips

How to Set Stop Losses on the Platform

Method 1: Order Panel

1. Open a trade using Buy or Sell button
2. Toggle Stop Loss to ON
3. Choose input method:
   • Price: Enter exact stop price
   • Pips: Enter distance in pips
   • Amount: Enter dollar amount at risk
4. The chart shows a preview line at your SL level
5. Execute the trade

Method 2: Drag on Chart

1. With a position open or order pending
2. Locate the stop loss line on the chart
3. Click and drag to your desired level
4. Release to confirm
5. Stop loss updates automatically

Method 3: Position Panel

1. Open the Positions panel
2. Find your open position
3. Click the Edit (pencil) icon
4. Modify stop loss value
5. Click Save Changes

Method 4: Right-Click Context Menu

1. Right-click on the chart
2. Select Modify Position
3. Enter new SL value
4. Confirm changes

Setting Trailing Stops

Automatic Trailing

1. When placing the order, enable Trailing Stop
2. Set trailing distance (e.g., 30 pips)
3. Stop follows price automatically as it moves in your favour
4. Once activated, trailing cannot be reversed

Manual Trailing

Manually adjust your stop as price moves:

1. Move to breakeven when +20-30 pips in profit
2. Trail below swing lows (for longs) / above swing highs (for shorts)
3. Use ATR for dynamic trailing distance

Stop Loss Placement Strategies

Technical Stops

Place stops at levels that invalidate your trade idea.

For Long Positions:

• Below recent swing low
• Below key support level
• Below a significant moving average
• Below trendline support

For Short Positions:

• Above recent swing high
• Above key resistance level
• Above a significant moving average
• Above trendline resistance

Example Long Setup:

Chart Pattern: Double bottom at 1.0950
Entry: 1.1000 (break above neckline)
Stop: 1.0940 (below pattern low)
Reasoning: If price breaks below double bottom, pattern fails

Volatility-Adjusted Stops

Use ATR or Bollinger Bands to set stops.

ATR Method:

Stop = Entry - (ATR(14) × 2)

Bollinger Band Method:

• Long: Stop below lower Bollinger Band
• Short: Stop above upper Bollinger Band

Time-Based Stops

Exit if the trade doesn't perform within expected timeframe.

When to Use:

• News trades
• Range breakouts
• Catalyst-driven trades

Example:

Trade: Long on NFP release
Entry: 1.1000
Price Stop: 1.0950
Time Stop: If not in profit after 2 hours, close at market

Dollar-Risk Stops

Fix maximum loss amount, calculate stop accordingly.

Max Risk: $200 per trade
Position Size: 0.5 lots (pip value $5)
Available Stop Distance: $200 / $5 = 40 pips

Step-by-Step: Setting Your Stop Loss

Step 1: Identify Your Entry Point

Know your exact entry price:

• Market order: Current ask (buy) or bid (sell)
• Limit order: Your specified limit price

Step 2: Determine Invalidation Level

Find where your trade idea becomes invalid:

Step 3: Add Buffer Zone

Don't place stops exactly at the invalidation level—add a buffer:

Support level: 1.0950
Spread: 2 pips
Buffer: 5 pips
Stop Loss: 1.0950 - 2 - 5 = 1.0943

Step 4: Calculate Risk Amount

1Risk = Stop Distance × Pip Value × Position Size
2
3Example:
4Stop Distance: 50 pips
5Pip Value: $10 per pip (1 standard lot EURUSD)
6Position Size: 0.2 lots
7Risk = 50 × $10 × 0.2 = $100

Step 5: Verify Risk:Reward

Ensure the trade is worth taking:

Entry: 1.1000
Stop: 1.0950 (50 pip risk)
Target: 1.1100 (100 pip reward)
Risk:Reward = 1:2 ✅ Good

Step 6: Set and Forget

Once your stop is placed:

1. Don't move it further away (widening)
2. Only move it to reduce risk (to breakeven or better)
3. Let the trade play out

Common Stop Loss Mistakes

1. Stop Too Tight

Problem: Getting stopped out by normal market noise Solution: Use ATR to gauge volatility; widen stop if needed

BAD: EURUSD 10-pip stop during high volatility
GOOD: EURUSD 40-pip stop (1.5× ATR)

2. Stop Too Wide

Problem: Large losses when wrong; poor risk:reward Solution: If required stop is too wide, reduce position size or skip trade

3. Moving Stop Further Away

Problem: "Giving it more room" leads to massive losses Solution: Accept the loss; don't move stops to avoid being stopped out

4. No Stop at All

Problem: "I'll watch it" – market gaps, internet fails, you fall asleep Solution: Always have a hard stop in the system

5. Stop at Round Numbers

Problem: Everyone places stops at 1.1000, 1.0950 – easy targets Solution: Offset by 3-7 pips from round numbers

BAD: Stop at 1.0950
GOOD: Stop at 1.0943 or 1.0956

6. Ignoring the Spread

Problem: Stop triggers earlier than expected Solution: Add spread to stop distance for short-term trades

Advanced Stop Strategies

Break-Even Stop

Move stop to entry price after achieving initial profit target.

When to Move to Breakeven:

• After 1:1 risk achieved (50% of target)
• After significant support/resistance break
• Before major news events

Risk: May get stopped out at breakeven during pullbacks

Two-Stage Stop

Different stop levels for different portions:

1Position: 1.0 lot
2Initial Stop: 1.0950
3
4At +50 pips:
5- Close 0.5 lots (+250 profit)
6- Move stop on remaining 0.5 lots to breakeven
7
8Outcome:
9Best case: Remaining 0.5 lots hits +100 = +$250 + $500 = $750
10Worst case: Remaining 0.5 lots stopped at breakeven = $250

Chandelier Exit

Trailing stop based on highest high/lowest low:

1Long Position:
2Stop = Highest High (N periods) - ATR × Multiplier
3
4Example (14-period, 3× ATR):
5Highest High (14 bars): 1.1100
6ATR: 50 pips
7Stop = 1.1100 - 0.0150 = 1.0950

Parabolic SAR Stop

Use SAR indicator for trailing:

1. Add Parabolic SAR to chart
2. Place stop at current SAR level
3. Adjust as SAR moves with price

Stop Loss Settings on the Platform

Configure Default Stop Loss

1. Go to Settings → Trading Preferences
2. Enable Default Stop Loss
3. Set default method:
   • Fixed pips
   • ATR-based
   • Risk percentage
4. All new orders include this stop automatically

Enable Stop Loss Alerts

Get notified when stop is approaching:

1. Settings → Notifications
2. Enable Stop Loss Warning
3. Set warning threshold (e.g., within 10 pips)
4. Receive alert before stop triggers

Guaranteed Stop Losses

Some brokers offer guaranteed stops (for a premium):

1. Check if your broker supports GSL
2. Enable Guaranteed Stop in order panel
3. Pay small premium for guarantee
4. Stop executes at exact price even during gaps

Stop Loss Checklist

Before every trade, verify:

• Stop loss is set BEFORE executing
• Stop is at technical invalidation level
• Buffer added for spread and noise
• Risk amount is within limits (1-2%)
• Risk:Reward is at least 1:2
• Stop is not at obvious round number
• Position size calculated correctly

Next Steps

Continue improving your trading with:

• Reading Charts - Better technical analysis for stop placement
• Using Indicators - ATR, SAR, and volatility tools
• Managing Portfolio - Overall risk management
• Risk Management Guide - Comprehensive risk strategies

Need Help?

• Trading FAQ: Stop Loss Questions
• Risk Management: Guide
• Live Support: Click the chat widget