How to set a stop-loss properly

A stop is a decision made while you are calm and executed while you are not. Its placement should come from the market's structure and volatility — never from how much you are willing to see on the screen.

Last verified 13 September 2026 · written by the DexLadder team

Start from invalidation, not from comfort

The only correct question is: at what price is this idea wrong? If you bought a breakout, the idea is wrong when price closes back inside the range. If you bought a level, it is wrong when the level fails. That price is the stop. What you are willing to lose is handled afterwards, by the size — never by dragging the stop closer to make the position feel affordable.

Then let volatility set the distance

A stop must sit outside ordinary noise or it is a random exit. Measure the asset's average true range and place the stop at a multiple of it — 1.5× to 2× ATR is a common band — or just beyond the structural level, whichever is further. An asset moving 6% on an ordinary day will take out a 3% stop routinely and tell you nothing.

Size from the distance

units = (account × risk%) ÷ |entry − stop|

This is the step that makes wide stops affordable. A stop twice as far away halves the position; risk per trade stays fixed. Run the numbers in the position size calculator before entering, not after.

The four failures

1. Round numbers. Stops cluster at obvious levels, and clusters are worth hunting. Sit beyond the obvious, not on it.
2. Stop-market in a thin book. The trigger and the fill are different prices. On an illiquid pair that gap can exceed the loss you were capping.
3. Moving it. Widening a stop because price approached it converts a defined loss into an undefined one. This single habit ends more accounts than bad analysis.
4. Confusing a stop with liquidation. On leverage, check that the stop sits well inside the liquidation price. A stop beyond it is decoration.

Trailing, and when it helps

A trailing stop converts an open profit into a floor and gives up the right to sit through a normal pullback. In a strong trend that trade is usually bad — ordinary retracements will take you out before the move finishes. Trailing earns its place late in an extended move, or when you cannot watch the position at all.

Related reading

Calculators for this

Terms used here

Questions people actually ask

What percentage should a stop-loss be?

There is no universal percentage. The distance should come from the asset's volatility and the level that invalidates your idea; the percentage of your account at risk is controlled by position size instead.

Should I use a stop-market or a stop-limit?

Stop-market guarantees exit but not price; stop-limit guarantees price but not exit. In fast markets a stop-limit can leave you in the position you were trying to leave.

Is it ever right to move a stop?

In the direction of the trade, to lock in profit — yes. Away from the trade to avoid being stopped out — that is how a small loss becomes an account.

Open the free Web3 desk — no account, nothing to install