Risk management · Intermediate

Stop Losses

A 1-minute lesson from the MarketPro academy, one of 22 in risk management.

Last reviewed 15 September 2026 by the MarketPro research desk · Editorial policy

Short answer

A stop loss is a pre-commitment to the price at which your idea is wrong. It converts an open-ended risk into a defined one, and it makes position sizing possible: without a stop distance there is no way to compute how much a trade can cost.

What a stop loss really is

Where to place stops

Structure-based: beyond the swing high/low or zone that invalidates the setup. If you are long from support, the stop belongs below the support zone — where the reason for the trade no longer exists.
Volatility-based: a multiple of ATR (commonly 1 to 2x) so the stop sits outside normal noise.
Worst practice: choosing the stop so the position size can be bigger. That inverts the entire logic of risk control.

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Common stop mistakes

Moving the stop away as price approaches it — turning a small planned loss into a large unplanned one.
Stops inside the noise: too tight for the timeframe, so random movement takes you out of good ideas.
Mental stops: in fast markets, hesitation costs. Beginners should always use hard stops.

Trailing and break-even

Moving the stop to entry after TP1, or trailing it behind structure, protects open profit — accepting that you will sometimes be stopped at break-even on trades that then run. That trade-off is a strategy choice; make it deliberately and consistently.

Note: stops are not guaranteed at the exact price during gaps or extreme volatility, which is one more reason to size conservatively.

Step 2 of 10 on Risk Management Mastery

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Written and reviewed by the MarketPro research desk

MarketPro is a trading-signal and trading-education app operated by Harajuku Holdings LTD (Cyprus). Our signal desk publishes and tracks every trade idea in-app, and every page here is checked against the app's live behaviour before publishing. Last reviewed 15 September 2026. How we produce signals and content · About MarketPro

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