Where should you place a stop loss?

The stop marks where you are wrong

A stop loss is not a number you can afford; it is the price at which your reason for the trade no longer holds. If you buy at support because buyers defended it, the trade is wrong once price closes clearly below that support.

Choosing the stop from the money first, for example “I will risk 10 pips because that is cheap”, puts it wherever it happens to land, often inside normal noise. Choose the place from the chart, then fit the size to it.

Three ways to find the place

• Beyond structure. Below the last higher low or the support zone for a buy; above the last lower high or resistance for a sell.
• Plus an ATR buffer. Add half to one ATR beyond the structure, so an ordinary wick does not reach the stop.
• Not on a round number. Levels such as 1.0800 or 2,400 attract orders. Place the stop a little beyond them, not on them.

Avoid stops at a fixed distance on every trade. Ten pips on a quiet morning and ten pips around a busy session open are not the same risk.

A worked example on gold

XAUUSD trades at 2,380 in an uptrend on 4h. Support sits at 2,370–2,374, and the 1h ATR is about $6. You plan a buy at 2,380. The structure says the idea fails below 2,370; half an ATR beyond that gives a stop at 2,367, which is $13 of price below the entry.

In the ticket, choose Risk % and enter 0.5. Press + Stop loss and enter 2,367 as a price. The ticket works out the volume for you, so you do not need to know the contract details: on a $10,000 account, Risk at SL should show about $50. On the chart a line marked Ticket SL … planned appears at 2,367, so you can check that it sits beyond the zone.

What the ticket shows

• The money you lose at the stop and Risk at SL.
• The share of the daily loss left that this order would use.
• A box If the stop loss hits with the daily loss limit and the overall loss limit before and after.
• Without a stop, a warning: “No stop loss: this order’s loss is not limited before your daily and overall loss limits.”

Read that warning literally. Without a stop, the only thing between one trade and your daily loss limit, $500 on a $10,000 1-Step Challenge account, is you watching the screen.

Moving the stop

Never widen a stop because price is coming close. That turns a planned −1R loss into an unplanned one. If the idea still looks good after the stop hits, you can plan a new trade with a new stop and the same risk.

Moving a stop in your favour is fine when the chart gives a reason, for example after price forms a new higher low above your entry. In fast markets and gaps a stop can fill beyond its price, so keep your risk per trade small enough to absorb that.