Where you place your stop-loss matters more than whether you set one. Too tight, and you’ll get stopped out every day; too wide, and one loss can wipe you out.
【Fixed-Percentage Method】For example, exit whenever you lose 1%–2% of your capital. It’s simple and blunt, and suitable for beginners
to build discipline. The downside is that it ignores market structure, so your stop could end up right in a cluster of other traders’ stops.
【Technical-Level Stop-Loss Method】Place it where the structure becomes invalid: below key support for a long position, and
above resistance for a short position. The logic is: if this level breaks, it’s evidence that I was wrong.
Adjust your position size based on the stop distance: the wider the stop, the smaller the position, so the loss on any single trade remains
1%-2%. This is the right order: set your position size based on your stop-loss level.
【My go-to combination】Use technical levels to determine direction and the invalidation point; use position sizing to protect your capital. When you combine the two, you
will find that trades with wider stops should naturally have smaller position sizes, while trades with tighter stops can handle larger positions.
Never reverse the order—setting your position size first and then looking for a stop-loss is why most people lose money.
What do you think? Share your experiences in the comments.