#StopLossStrategies

Using a Pre-Agreed Stop Loss: A Disciplined Approach to Risk Management

Trading with a pre-determined stop loss is a smart and disciplined way to manage risk. It involves setting a limit on how much you're willing to lose on a trade before you even enter it. Here’s a step-by-step guide on how to do it effectively:

1. Set Your Risk Per Trade

Decide what percentage of your trading account you're comfortable risking on a single trade—typically between 1% and 2%.

Example:

If you have a $10,000 account and choose to risk 1%, your maximum loss per trade would be $100.

2. Analyze the Market and Identify an Entry Point

Use your trading strategy—whether it's technical or fundamental analysis—to find a strong and strategic entry point.

3. Choose a Logical Stop-Loss Level

Set your stop loss at a point where your trade thesis would be proven wrong—not just a random number.

For long positions: place it below a significant support level.

For short positions: place it above a key resistance level.

4. Calculate Your Position Size

With your risk amount and stop-loss distance known, calculate how many units (shares, lots, etc.) you can trade.

Example:

Risk: $100

Stop-loss distance: $0.50

Position size: $100 ÷ $0.50 = 200 shares

5. Execute the Trade with Your Stop Loss in Place

Enter the trade and immediately set your stop-loss order. This ensures your risk is managed from the start.

6. Stick to Your Plan

Don’t widen your stop loss after entering the trade—that breaks your discipline. However, you can adjust it closer or move it to breakeven if the trade moves in your favor.

---

If by “agreed stop loss” you meant agreeing on the stop level with someone else (like a mentor, trading group, or signal provider), let me know—I can adjust this guide accordingly.

#StopLossStrategies #RiskManagement #TradingDiscipline