What percentage should a stop-loss be?

There is no universal percentage: the stop goes at a logical place on the chart, and risk is controlled through position size. Many traders try not to lose more than 1–2% of the account on a single trade.

What is the difference between a stop-loss and a stop-limit?

A stop-loss becomes a market order when triggered, so the fill is almost guaranteed but the price is not. A stop-limit caps the price, but if price moves past the limit it may not fill at all.

Why does price bounce back right after my stop is hit?

Often the stop is too tight or sits exactly where everyone places theirs. Setting the stop using ATR and levels, and sizing the position to match, helps.

Risk

What is Stop-loss?

In short

An order that automatically closes a position when price reaches a set level, to cap the loss.

A stop limits the loss, but if price gaps past it, the fill can be worse than the stop price.

Also known as: SL, stop

A stop-loss is an order that automatically closes a position when price reaches a preset level. It has one job: to cap the loss on a single trade at the amount you planned. A trade without a stop is a trade with an unknown amount at risk.

How it works

In a long position the stop sits below the current price. When price falls to the stop level, the stop order becomes a market order and fills at the first available price. That means:

in a fast market the fill can be a little worse than the stop (slippage);
if price gaps over the stop, the loss can be much bigger than planned.

A stop-limit order controls the price but doesn't guarantee a fill — in a sharp drop the position may not close at all.

Where to put it

Place the stop based on the chart, not on money — at the point that says "my idea was wrong": below support, below the last low, or at an ATR-based distance. Then calculate the position size from that distance: Size = Risk amount ÷ (Entry − Stop).

Rules

Never move a stop further away from price — that is increasing risk without a plan. Moving it in the direction of profit (with a trailing stop or by moving it to breakeven) is normal practice.

Where to place the stop

Put the stop a little below the level: if the level breaks, the idea was wrong. A stop inside the zone gets hit by a plain wick.

Example

Illustrative case: a $12,000 account risking 1% per trade = $120. The stock is at $40 and the stop goes below the last low at $37.60.

Risk per share: $40 − $37.60 = $2.40.
Size: 120 ÷ 2.40 = 50 shares.
If the stop is hit, the loss is 50 × $2.40 = $120 — exactly 1%.

Now the gap scenario: after bad news the stock opens at $35. The stop fills around $35:

Actual loss: 50 × ($40 − $35) = $250 — roughly twice the plan.

A stop limits the loss but doesn't guarantee it absolutely. You can work out the size with the position size calculator.

Mistakes and tips

Put the stop a little beyond the level, not right on it — the spot where most stops cluster gets hit first.
Moving the stop lower as price approaches it is one of the most expensive habits: a small planned loss becomes a big unplanned one.
Place the stop as a real order with your broker, not in your head — in a fast market you may not have time to close manually.
When the stop distance grows, reduce your size — the dollar risk should stay the same.

Calculate it

Position size calculator

Enter your balance, risk percent, entry and stop — instantly see how many shares to buy and how much you lose if the stop is hit.

Frequently asked questions

What percentage should a stop-loss be?: There is no universal percentage: the stop goes at a logical place on the chart, and risk is controlled through position size. Many traders try not to lose more than 1–2% of the account on a single trade.
What is the difference between a stop-loss and a stop-limit?: A stop-loss becomes a market order when triggered, so the fill is almost guaranteed but the price is not. A stop-limit caps the price, but if price moves past the limit it may not fill at all.
Why does price bounce back right after my stop is hit?: Often the stop is too tight or sits exactly where everyone places theirs. Setting the stop using ATR and levels, and sizing the position to match, helps.

Learn it in the Academy

This term is covered with hands-on examples and a quiz in these lessons of the interactive course.

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