Trading with an agreed stop loss (or agreed-upon stop loss) is a disciplined way to manage risk. It means you decide in advance the maximum loss you're willing to take on a trade and set a stop-loss order accordingly. Here's a step-by-step guide to doing this properly:
1. Define Your Risk Per Trade
Decide how much of your account you're willing to risk on a single trade (usually 1-2%).
Example:
If your account has $10,000 and you risk 1%, your max loss per trade is $100.
2. Analyze the Market and Find Entry Point
Use your strategy (technical or fundamental analysis) to find a solid entry point for the trade.
3. Determine a Logical Stop-Loss Level
Place your stop loss where your trade idea becomes invalid not just a random number.
• For long trades: below a key support level.
• For short trades: above a key resistance level.
4. Calculate Position Size
Once you know your risk per trade and the distance from entry to stop loss, calculate how many units (shares, lots, etc.) you can trade.
Example:
• Risk per trade: $100
• Stop loss distance: $0.50
• Position size: $100 / $0.50 = 200 shares
5. Place the Trade with the Stop Loss
Use a stop-loss order when placing your trade or right after entering the position. This automates your risk control.
6. Stick to the Plan
Never move your stop loss further away after entering this breaks discipline. You can move it closer or to breakeven if the trade moves in your favor.
If you meant something else by "agree stop loss" - like agreeing with someone (a group or a signal provider) - let me know and I can tailor the answer!