Step by step
How to read it
- 1The entry.
- 2The level the idea depends on.
- 3The stop sits beyond it — and beyond the wicks — where the idea is wrong. If hit, the loss is small and known in advance.
Watch out
Common mistake
Moving the stop further away as price comes close. A small planned loss becomes a big unplanned one.
In one line
Definition
An order that closes the trade if price reaches a level where the idea is wrong.
Check yourself
Check yourself
Where does a stop loss belong?