Stop Loss Planning

A stop loss defines where your trade idea is invalid and where risk should be cut.

Formula

Risk per share (long) = entry - stop

Entry: 75. Stop: 72.50 for a long setup.

Risk per share is 2.50.

With 120 shares, planned total risk before fees is 300.

Should stop loss be based on a fixed percent?

It can be, but many traders place stops at structure levels and then size the position from that distance.

Can slippage make actual loss larger than planned?

Yes. Gaps, liquidity, and execution quality can all increase realized loss versus planned risk.

Use this concept in a synthetic setup, then validate risk, reward, and R-multiple before placing a trade.

Educational content only. Not financial advice.