Where you place your stop-loss matters more than whether you set one. Place it too close and it gets triggered every day; place it too far away and one loss can really hurt.
【Fixed-percentage method】For example, exit whenever you lose 1%–2% of your capital. It’s simple and straightforward, and suitable for beginners
to build discipline. The downside is that it ignores market structure, so your stop could end up right where other people’s stops are clustered.
【Technical-level stop-loss method】Place it where the structure is invalidated: for a long position, below key support; for a short position, place it
above resistance. The logic is—if the price breaks through this level, it’s evidence that I was wrong.
Adjust your position size accordingly: if the stop-loss is far away, reduce your position size to ensure the loss on a single trade is still a percentage of your capital.
1%–2%. This is the correct order: let the stop-loss level determine your position size.
[My most-used combination] Use technical levels to determine direction and the invalidation point; use position sizing to protect your capital. Once you combine the two, you'll
find that trades with wider stops should naturally have smaller positions, while trades with tighter stops can have somewhat larger positions.
Never reverse the order—setting your position size first and then looking for a stop is why most people lose money.
What do you think? Share your experiences in the comments.