1. What is a stop loss?
A stop-loss order seeks to close a position automatically when its loss reaches a specified level. It is a central tool for protecting capital.
2. Main stop types
1. Fixed-percentage stop
- Sell after a decline of a fixed percentage from entry.
- Example: place the stop 3% below entry.
- Benefit: simple and clear.
- Drawback: ignores volatility.
2. Trailing stop
- When price moves favorably, the stop follows it.
- Protects gains while following a trend.
- Benefit: seeks to maximize profits.
- Drawback: frequent stop-outs in sideways markets.
3. ATR-based stop
📊 The source's preferred method
Set the stop distance using ATR, a volatility measure, multiplied by a chosen factor.
It adapts automatically: wider in high volatility and tighter in low volatility.
The source describes this as NOONOO TRADING's method.
3. Trading without a stop
🚨 The guide's warning: no stop can mean ruin
• “It will recover if I wait” can lead to a 50% loss.
• Leverage without a stop is associated here with forced liquidation and loss of all committed funds.
• The original guide asserts that 100% of professional traders use stops.