#StopLossStrategies

A stop-loss strategy is a risk management tool used by traders to limit potential losses in financial markets. It involves setting a predetermined price level at which a trade will automatically close to prevent further losses. For example, if a trader buys a stock at $100 and sets a stop-loss at $95, the trade will exit once the price drops to that level, minimizing risk.

There are different types of stop-loss strategies: fixed stop-loss, where a specific price is set; trailing stop-loss, which adjusts as the asset’s price moves favorably; and percentage-based stop-loss, where the exit is set based on a percentage decline from the entry price.

A well-placed stop-loss protects capital, prevents emotional decision-making, and enhances long-term profitability. However, setting stops too tight may result in premature exits, while wide stops could lead to large losses. Proper balance, combined with market analysis, ensures effective stop-loss execution.