Where should I place my stop loss?

    Quick Answer

    Place stop losses below key support levels, pattern lows, or recent swing lows - where the trade thesis would be invalidated.

    Detailed Explanation

    Stop loss placement should be based on technical levels that would invalidate your trade thesis if breached. For long positions, place stops below support levels, pattern lows, or moving averages. The key is finding a level where if price reaches it, your analysis was wrong. Avoid arbitrary percentage-based stops that ignore market structure.

    Key Points

    • 1Below pattern low for pattern trades
    • 2Below recent swing low for trend trades
    • 3Below key support levels
    • 4Below significant moving averages
    • 5Account for volatility (ATR-based stops)

    Example

    Buying a cup and handle breakout at $100 with handle low at $95: Place stop at $94.50 (just below handle low).

    Common Mistakes to Avoid

    • ✗Placing stops at obvious round numbers
    • ✗Setting stops too tight (noise stopouts)
    • ✗Setting stops too wide (excessive risk)
    • ✗Not adjusting for asset volatility

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