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Risk & sizing

Stop-loss

A trading stop-loss is a pre-committed exit price that caps the loss on a trade — mental stops don't count, and the journals prove it under stress every time.

A stop-loss is a price at which you've pre-committed to exit a losing trade. The point is to define your risk before you enter — once price hits the stop, you're out, no negotiation.

Critical distinction: a hard stop is entered with the broker (limit-on-stop or stop-market) and executes automatically. A mental stop is a number in your head. Mental stops fail catastrophically under stress; this is one of the most documented failure modes in trader journals.

Stop placement is its own discipline. Too tight and normal noise stops you out; too wide and your R-multiple suffers. Common references: just below the prior swing low (for longs), under the moving average that defines the trend, or a multiple of average true range (ATR).

Trailing stops convert a winner into a runner without giving back everything if the move reverses. They're a different discipline than initial stops and need their own rules — moving the stop manually after every bar invites confirmation bias.

Not financial advice. This page describes a commonly-used trading concept for educational purposes. It is not a recommendation, does not predict performance, and is not personalized advice. Past performance does not guarantee future results.