Most of us've heard about STOPLOSS when we enter to the world of trading and investment. But What's the real meaning of STOPLOSS?
Most of the traders think that STOPLOSS is bad and move SL away from Entry Price. Some people remove SL or didn't set SL. Because we lose our money when we hit SL and we get money when we hit TP(Target Profit).
But It is not losing money. It is preventing our money. Let me explain to this.
If you have 1000USDT in your future account, your potential amount for losing money is 1000 USDT (100%). 100% That's Ture. You won't lose 1001 USDT anymore.
So, when you set SL , it means that you've defined your risk per single trade. If you decide to take a risk 5% per single trade, you will lose 50 dollar per single trade.
In the other hand, You will lose only 5% of your account (50$) Not 1000$. Now you prevent your account form losing all money.
By setting SL, you won't face with the big loss on the single trade.
So In my opinion, We should set SL every single trade to prevent from big losses.
Tell me what do you think in the comment.
#stoploss #preventbigloss #StopLossTruths

A stop loss order is a crucial tool in trading, designed to limit risk on any given trade by automatically closing the position if the market moves against you. Implementing stop loss orders effectively is a critical component of a well-rounded risk management strategy. However, if you find that your stop losses are frequently triggered before the market reverses in your favor, it may indicate a problem in how you are placing them. Here’s how to properly set a stop loss order and the common mistakes traders make.
### The Purpose of a Stop Loss Order
The goal of a stop loss order is to control risk. By setting a maximum threshold, traders can minimize potential losses and stay active in the market for the long term. However, when used incorrectly, stop losses can frequently get triggered, causing frustration as the trade reverses shortly after hitting the stop level. Understanding why this happens is essential to improving your trading outcomes.
### Common Mistake: Placing Stop Losses Incorrectly
To illustrate, imagine you have decided to risk no more than 2% of your account balance on any trade. If your account is valued at $10,000, your maximum allowable loss per trade would be $200. Suppose you analyze the chart and decide to go long on the S&P 500 e-mini futures (ES) with two contracts. Each point movement in this market is equivalent to $50 of profit or loss. With two contracts, each point change represents a $100 movement in your account.
You then set your stop at 2,468 to align with your $200 risk limit. However, minutes after entering the trade, your stop gets hit, and the price reverses, moving in the direction you originally anticipated. You may feel confident that you managed your risk, but in reality, you may have made a low-probability trade, causing your stop to be triggered unnecessarily.
### The Correct Approach to Placing a Stop Loss Order
To set an effective stop loss, you must determine where the market trend genuinely reverses. In this case, the upside trend might only reverse when sellers manage to break the low at 2,466. Many traders will agree that a dip below 2,465 would likely trigger long positions to liquidate, activating their stop loss orders. Setting your stop just below this level at 2,464.75 increases the likelihood of placing an effective stop loss order.
However, since your risk tolerance only allows for a $200 loss, you have to adjust your trade size accordingly. If you only risk two points per trade, you shouldn’t pay more than 2,466.75. This may require waiting for a significant dip to enter the trade. Alternatively, you could reduce your trade size to one contract instead of two. This adjustment would give you up to four points of risk, still within your $200 risk limit, allowing you to buy at up to 2,468.75.
While this approach might reduce potential profits if you’re correct, the focus should be on managing risk, not maximizing gains. By placing the stop loss properly, you protect your position and minimize potential losses—essential skills for successful risk management.
### Why Most Traders' Stop Loss Orders Get Hit
Many traders experience their stop losses being triggered frequently, followed by the market moving in their intended direction. This occurs because inexperienced traders often prioritize quick market entry over carefully managed risk. They set their stops based on how much risk they are willing to take, not on where the market's critical levels actually are.
Professional traders, on the other hand, anticipate where these stops are likely placed. They may push the market just far enough to trigger these amateur stops before buying the asset at a slightly lower price, taking advantage of the subsequent upward trend.
### Adjusting Your Strategy: A Professional Approach
Making small adjustments to how you place your stop loss orders can lead to significant improvements in your trading performance. Instead of focusing on entering trades as quickly as possible, focus on finding the market’s critical levels and setting your stop accordingly. This disciplined approach may reduce your risk exposure and increase the probability of your trade being successful.
### Conclusion
The key to effective trading is risk management, not chasing profits based on emotion. By aligning your stop loss orders with market dynamics rather than arbitrary risk limits, you can improve your results and reduce the frequency of getting stopped out prematurely. Practice these adjustments and track your progress over the next few weeks to see the difference it makes. Remember, professional trading success is built on small, strategic changes that have a big impact over time.