#StopLossStrategies A stop-loss is an order to sell a security (such as a stock, cryptocurrency, or commodity) when it falls to a certain price, known as the stop-loss price. The purpose of a stop-loss is to limit an investor's potential loss on a trade by automatically selling the security when it reaches a predetermined price.
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Stop-loss strategies are essential for managing risk in trading. Here are some common stop-loss strategies:
Fixed Stop-Loss
1. *Percentage-based stop-loss*: Set a stop-loss at a fixed percentage (e.g., 5%) below the entry price.
2. *Dollar-based stop-loss*: Set a stop-loss at a fixed dollar amount (e.g., $10) below the entry price.
Trailing Stop-Loss
1. *Percentage-based trailing stop-loss*: Set a trailing stop-loss at a fixed percentage (e.g., 5%) below the highest price reached.
2. *Dollar-based trailing stop-loss*: Set a trailing stop-loss at a fixed dollar amount (e.g., $10) below the highest price reached.
Volatility-Based Stop-Loss
1. *Average True Range (ATR) stop-loss*: Set a stop-loss based on the ATR indicator, which measures market volatility.
2. *Bollinger Bands stop-loss*: Set a stop-loss based on the Bollinger Bands indicator, which measures market volatility.
Time-Based Stop-Loss
1. *Time-based stop-loss*: Set a stop-loss at a specific time (e.g., end of the day) or after a certain period (e.g., 30 minutes).