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Stop Loss & Strategies Note
What is a Stop Loss?
A stop loss is a predefined price level at which your trade will automatically close to prevent further losses. It's a key part of risk management.
Limit Stop Loss:
Sets a trigger price and a limit price.
Example: Trigger Price: $100, Limit Price: $98 — if the market hits $100, a sell order is placed at $98.
Market Stop Loss:
As soon as the trigger price is hit, the order sells at the current market price.
Useful during fast-moving markets.
Trailing Stop Loss:
Moves with the price to lock in profits.
Example: You set a $5 trailing stop at $100. If the price rises to $110, the stop loss moves up to $105 automatically.
How to Set a Good Stop Loss Strategy:
Base it on your entry price and support/resistance levels.
Never risk more than 1-2% of your total capital per trade.
Be aware of news and market volatility.
Rules:
Always set a stop loss before opening a trade.
Don’t cancel your stop loss out of fear or greed.
Have separate strategies for long-term and short-term trades.