A stop loss is where your trade idea is proven wrong. Not where it hurts. Not a random number.
BestChart stopBeyond the swing or level that proves you wrong
ATRVolatility stop1.5–2× ATR away so noise can't tag you
%Percentage stopFixed % of account. Simple but ignores the chart
⏱Time stopExit if the trade does nothing for X candles
Chart stops (the favourite)
Below the swing low for longs, above the swing high for shorts, or beyond the level you're trading.
Volatility stops
Add a buffer using ATR so normal noise can't tag you.
Rookie mistake
Putting the stop exactly on the obvious low. Everybody's stop is there. Give it a small buffer.
Wick says
If your stop gets hit, it should mean "I was wrong," not "the market sneezed."
Key takeaways
- Stops go where the idea is invalidated.
- ATR buffers protect against normal noise.
- Size the position to fit the stop, never the reverse.