In this Article we will learn, where to use stop loss with chart examples, Lets discuss some definition first 👇

📣 Stop Loss: The Most Important Tool for Trading

Stop loss is an order that automatically sells a coin, when its price reaches a certain level, known as the stop price. It is used to limit losses in case the Coin price goes down.

Why is stop loss so important?

  • It helps you to control your losses.

  • It prevents you from making emotional decisions when the market is moving against you.

  • It can help you to stay disciplined and stick to your trading plan.

📣 The 2 Essential Tools for Trading

There are only two essential tools for trading:

  1. Risk management

  2. Stop loss

Risk management is the process of maintaining your position and controlling your risk. This includes setting stop losses, your risk tolerance, and using other techniques to manage your risk.

💣 I will create another article on risk Management, We are here to learn today about Stop Loss, So, Let's dive into it.

If you neglect these two tools, you are setting yourself up for failure. So make sure you understand them and use them in your trading.

📣 Check the chart and read below, where to put stop loss.

  • Enter trades at specific points. Use technical analysis to find clear support or resistance levels to enter trades.

  • Place stop losses. Set stop losses at the invalidation point of your trade setup. This will protect your capital from significant losses.

  • Protect your capital. Placing stop losses is essential for protecting your trading capital.

📣 Stop loss depends on the chart and TA

Don't set a fixed stop loss. It should be based on TA. Every trading setup is unique.

📣 Stop loss = invalidation level

Your entry should be based on TA. When TA is no longer valid, exit the trade. The invalidation level is the point at which TA is no longer valid.

Entry Example:

Invalidation Point Reached? GET OUT!

đŸ‘» Stop Loss is a tool to be used immediately when your setup reaches the invalidation point. You must know, this level before entering a trade. The moment the invalidation event becomes true, exit without hesitation. đŸ‘»


(I will suggest you to read it again if you have any doubts, let me know in comments)

📣 Conclusion

  1. Stop loss cannot be a fixed percentage as all trade setups are different.

  2. Stop Loss is nothing but an exit at an invalidation level. Reason for entry no longer valid = Stop Loss.

  3. Use ONLY TA to find stop loss. Stop Loss = Invalidation level.

  4. Always have the Stop Loss determined before entering a trade.

  5. You don't have to post the SL order, you can exit manually on invalidation to avoid false wicks aka Stop hunting.

About Stops Hunting and wicks, i will make another short post

To succeed in trading, it's important to learn how to use Stop Loss effectively. Without good risk management and a smart Stop Loss plan, you'll face big losses in your trading journey.

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