Stop loss was invented not to save your money, it was invented to make you lose your money.

If you think that placing stop loss will save you from lose, man you are damn wrong. Let me make it clear.

Imagine you bought a scam / shit coin, there are many, but let’s say STRK as an example.

Suppose you bought 1000STRK with 2.5$ each. So total 2500$. You set stop loss at 2$, so you thought the max you gonna lose is 500$. You went sleep and at morning you found you are in 1250$ loss.

How?

Stop loss is not a function that stop you from losing. It’s basically a sell trigger. When the price riches a predefined point, it triggers the sale order (which is market order).

So basically when SL 2.00 will hit for STRK, the function imminently place a sale order and even if the market price went down further like (1.5 $) it will still sell at that price.

So stop loss is not saving you in any way.

Imagine you gave your friend 100k for his business at 50% - 50% share split. You said you can take max 15k loss. Let’s say on first month your friend makes 10k so the capital is 110k. But on the second month your friend lost 50k, so the capital is 60k (although you was expecting max 15k loss, you are now at 20k loss). Now he will return you 80k and take the full share of the business.

Eventually he makes 50k profit, but you don’t hold any share now.

Conventional stop loss always helps the liquidity providers or brokers. It never helped a trader in most cases. Maybe you loss less with stop loss, but you will still loss.

Even in many case we see the market makers create fake price to hit our stop loss in high volatile market.

So how we use stop loss? Professional traders uses virtual stop loss or algorithmic stop loss using their own trading softwares.

Virtual stop loss is a stop loss, that only get placed automatically if specific conditions are met.

Algorithmic stop loss is also same as virtual stop loss, but it’s bit more advanced. Instead of selling all at once, it keeps selling gradually at better prices. Stop loss keeps changing.

I’ll show these in future.