Stop-Loss is an automatic sell order that triggers when stock falls to a specified price. The #1 tool for capital preservation. "Cut losses short" — Wall Street's oldest rule.
📊 Types
- Hard stop: Fixed price (e.g., 7% below entry)
- ATR stop: 1.5-2× Average True Range below entry
- Trailing stop: Moves up as price rises, locks in profit
- Time stop: Exit if trade not working in X days
🎯 Where to Place
- Below recent swing low
- Below support level
- Below MA20 or MA50
- 2-3% buffer from key level (avoid stop hunts)
⚠️ Common Mistakes
- Setting stop too tight (gets stopped by noise)
- No stop (catastrophic losses)
- Moving stop down (defeating the purpose)
- Mental stop (most people don't execute)