Stop Loss

A stop-loss order is your primary defense against large losses. It's an instruction to automatically close your trade if the price moves against you to a specified level. If you buy EUR/USD at 1.0850 and set a stop-loss at 1.0800, your maximum loss on that trade is 50 pips (plus slippage in fast markets).

Stop-loss placement is both art and science. Too tight, and normal market noise hits your stop before the trade has a chance to work. Too wide, and you're risking more than necessary. Common approaches include placing stops below recent support (for longs) or above recent resistance (for shorts), using ATR (Average True Range) to measure normal volatility, or using a fixed pip amount based on the timeframe.

The hardest part about stop losses isn't setting them — it's leaving them alone. It's tempting to move your stop further away when a trade is going against you, giving it "room to breathe." This is almost always a mistake. If your original analysis included a stop-loss level, moving it means you're making an emotional decision, not an analytical one. The stop is there to protect you. Let it do its job.