A stop-loss is a powerful tool in trading, designed to limit potential losses in case the market moves against your position. Here is a beginner-friendly explanation based on the examples in your image:
What is a Stop-Loss?
A stop-loss is a predetermined price level where you exit a trade to prevent further losses. You can place it in different areas depending on the market structure and price action. Below are the key scenarios where stop-losses are applied:
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1. Behind the Supply and Demand Zones
Offer Creation: Set the stop-loss slightly above the offer zone (area where there is selling pressure).
Demand Creation: Place the stop-loss slightly below the demand zone (area where there is buying pressure).
2. Behind the Gap Retests
Bearish Gap Retest: After a gap is filled, place the stop-loss above the gap.
Bullish Gap Retest: Similarly, place the stop-loss below the gap after a bullish gap is filled.
3. Behind Structure Retests
After a breakout, wait for a price retest near the breakout level. Place the stop-loss beyond the level where the structure (support or resistance) is invalidated.
4. Liquidity Runs
In liquidity run scenarios (false breakouts), where the price spikes to capture liquidity before reversing, you can set your stop-loss beyond these false breakout zones.
5. Continuation Patterns
Behind Supply Continuation: Place stop-loss above the supply zone after a new low is made.
Behind Demand Continuation: Place stop-loss below the demand zone after a new high is established.
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Key Tips for Binance Beginners
1. Define Risk Levels: Risk only 1-2% of your total portfolio on a single trade.
2. Use Conditional Orders: Binance allows you to automate stop-loss orders to exit trades quickly.
3. Analyze Market Structure: Understand whether you are in a trending or trading market to set effective stop-loss levels.
4. Practice Risk-Reward Ratios: Look for trades with at least a 1:2 risk-reward ratio to ensure long-term profitability.
Let me know if you would like help setting up a stop-loss strategy for specific trades!
