JustChartsWhere to Place a Stop-Loss: 4 Practical Methods
Place a stop-loss where your trade idea is proven wrong — usually just beyond a recent swing high or low, or beyond a support or resistance zone — with a buffer for normal noise. Then choose a position size so that hitting the stop costs only a small, fixed share of your account. Never widen a stop once the trade is open.
Key facts
- Best rule
- stop where the idea is invalid, then size the position
- Structure stop
- beyond the last swing high/low or key level
- ATR stop
- often 1.5–2 × ATR from entry
- Avoid
- round numbers and obvious levels exactly
- Never
- move a stop further away to avoid a loss
1. Structure-based stops
For a long trade, put the stop below the most recent swing low or below a support zone; for a short, above the recent swing high or resistance. If price breaks that level, the reason for the trade has gone.
Add a small buffer beyond the level — for example a few pips plus the spread — because price often pokes through obvious levels before reversing.
2. Volatility (ATR) stops
The Average True Range (ATR) measures how far a market typically moves per bar. A stop of 1.5–2 × ATR from entry keeps you out of normal noise. When volatility rises, the stop widens and the position size shrinks automatically.
Example: EUR/USD daily ATR is 70 pips. A 1.5 × ATR stop is 105 pips — far too wide for a 15-minute trade, about right for a multi-day swing trade.
3. Percentage stops
Some traders exit if price moves a fixed percentage against them. It is simple, but it ignores the chart, so stops often land in random places. Use it as a maximum rather than the main method.
4. Time stops
If a trade hasn’t worked within a set time — a few hours for a day trade, a few days for a swing trade — close it. Capital tied up in a trade that isn’t moving has an opportunity cost.
Then size the position
Lots = account risk ÷ (stop distance in pips × pip value per lot)
The stop decides the distance; your risk rule decides the money. See position sizing and risk–reward ratio.
Common mistakes
- Stops so tight that normal noise or the spread hits them.
- Stops exactly on round numbers or obvious levels.
- Moving the stop further away when price approaches it.
- Forgetting that stops can slip during news and gaps.
Frequently asked questions
How many pips should a stop-loss be?
There is no fixed number. Set the stop where your idea is wrong on the chart and size the position to match; a 15-pip stop suits some trades and a 150-pip stop suits others.
Should I use a stop-loss on every trade?
Yes. Without one, a single unexpected move can cause a loss far larger than planned, especially with leverage.
Is it OK to move a stop-loss?
Moving it in your favour to lock in profit (trailing) is fine. Moving it further away to avoid a loss defeats its purpose.
Put it into practice
Live charts, an economic calendar and trading calculators — free with a JustCharts account.
Size the trade with the position calculatorThis article is for education only and is not financial advice. Trading leveraged products carries a high risk of losing money. Contract sizes, trading hours and leverage limits vary by broker and country — always check your own broker’s specifications.