Stop-Loss Strategies Every Trader Should Know

A stop-loss is an automatic order that closes your trade if the price moves against you by a specified amount. It is the single most important tool for protecting your trading capital.

Fixed Point Stop

The simplest type — you decide to exit if the price moves a fixed number of points against you. Easy to set but does not account for market volatility, so it may be triggered too easily on volatile stocks.

Percentage-Based Stop

Set the stop at a fixed percentage below your entry price (e.g. 2%). This scales with the price of the stock but does not adapt to how volatile the particular stock is.

ATR-Based Stop

The Average True Range (ATR) measures a stock's typical daily volatility. Setting your stop at 1–2x the ATR below your entry means you are giving the trade enough room to breathe without being stopped out by normal price fluctuations.

Trailing Stop

A trailing stop moves up with the price as the trade goes in your favour, locking in profit while still protecting against a reversal. It is particularly useful for trend-following strategies.

Where NOT to Place a Stop

Avoid placing stops at obvious round numbers (e.g. exactly at R100 or $50) as these are heavily targeted by institutional traders. Place stops beyond key support/resistance levels to avoid being swept out by normal volatility.