#StopLossStrategies "Stop loss" strategies are risk management techniques used in trading (stocks, crypto, forex, etc.) to limit potential losses. Here are several types of stop-loss strategies:
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1. Fixed Stop-Loss
How it works: You set a specific price or percentage at which your position will automatically close if the market moves against you.
Example: Buy at $100, stop-loss at $95 (5% loss).
Best for: Beginners or volatile assets.
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2. Trailing Stop-Loss
How it works: The stop-loss moves with the market price in your favor but stays fixed if the market goes against you.
Example: 5% trailing stop on a stock that rises to $120 from $100 will move the stop to $114.
Best for: Locking in profits while still limiting risk.
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3. Volatility-Based Stop-Loss
How it works: Stop-loss is set based on the asset's recent volatility (e.g., using ATR – Average True Range).
Example: If ATR is $2, you may place a stop-loss $4 away from the entry.
Best for: Traders who want to avoid being stopped out by normal price fluctuations.
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4. Time-Based Stop-Loss
How it works: Exit the position if it hasn't moved as expected within a set timeframe.
Best for: Short-term or day traders who want to manage opportunity cost.
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5. Percentage-Based Stop-Loss
How it works: Risk a fixed percentage of your trading capital on each trade.
Example: If your capital is $10,000 and risk tolerance is 2%, you only risk $200 per trade.
Best for: Portfolio risk management.
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6. Support/Resistance Stop-Loss
How it works: Place your stop just beyond a key technical level (e.g., below support or above resistance).
Best for: Technical traders.