Stop Loss
An order that automatically closes a trade at a predetermined price level to limit potential losses.
What is Stop Loss?
A stop loss (SL) is an order that automatically closes your trade when the price moves against you by a specified amount, limiting your loss.
Example
You BUY EUR/USD at 1.0850:
- Set stop loss at 1.0820 (30 pips below)
- If price drops to 1.0820, trade closes automatically
- Maximum loss = 30 pips
Setting Stop Losses
Common methods:
- Fixed pips: Always use same pip distance
- Below support/resistance: Technical levels
- ATR-based: Based on volatility
- Percentage risk: Based on account balance
Stop Loss Rules
- Always use a stop loss - No exceptions
- Set before entering - Know your risk first
- Don’t move it further - Widening stops = larger losses
- Account for spread - Add spread to your stop distance
Currency Strength Tip
Use our Currency Strength Meter to confirm your trade direction before setting tight stops. Strong divergence = more confident stop placement.