#StopLossStrategies 1. Fixed Percentage Stop Loss

How it works: Set a fixed percentage below your entry price (e.g., 5%, 7%, or 10%) as your stop-loss level.

Example: Buy a stock at $100; set a 7% stop loss at $93.

Best for: Beginners or long-term investors who want simplicity.

Pros: Easy to calculate, removes emotion.

Cons: May not account for volatility or support/resistance levels.

2. Trailing Stop Loss

How it works: Dynamically adjusts your stop loss as the asset price rises, "trailing" behind the current price by a fixed percentage or dollar amount.

Example: Buy a stock at $50, set a 10% trailing stop. If the stock rises to $60, the stop moves to $54 (10% below $60).

Best for: Trending markets to lock in gains while giving room for growth.

Pros: Captures upside, protects profits.

Cons: Can trigger prematurely in choppy markets.

3. Volatility-Based Stop Loss (ATR Strategy)

How it works: Use the Average True Range (ATR) indicator to set stops based on the asset’s volatility. Multiply the ATR by a factor (e.g., 1.5x or 2x) and subtract from your entry price.

Example: If ATR is $3 (daily volatility), set a stop loss at $100 – (2x $3) = $94.

Best for: Stocks, forex, or crypto with high volatility.

Pros: Adapts to market conditions.

Cons: Requires familiarity with technical indicators.

Key Tips for Effective Stop Losses

1. Never Risk More Than 1-2% Per Trade: Size stops so a loss won’t devastate your portfolio.

2. Avoid Round Numbers: Stops at $100 or $50 are often targeted by algorithms; use $99.50 or $49.75 instead.

3. Adjust for Market Conditions: Tighten stops in volatile markets, widen them in stable trends.

4. Backtest Your Strategy: Ensure your stop-loss rules work historically for your asset class.

5. Combine Strategies: Use trailing stops with volatility filters or support levels for better accuracy.