Trading glossary
Stop loss: meaning in trading
A stop loss is an order that closes a trade at a set price if it goes against you, capping the loss.
The stop is where your trade idea is proven wrong. It should go there, not wherever makes the loss feel comfortable.
How we place it
In the Asia sweep strategy the stop goes just beyond the high or low of the sweep, a fixed 10 pips at most. If price gets back through the sweep, the reversal idea has failed and the loss is small and planned.
Never move a stop further away to avoid a loss. That is how a 1R loss becomes a blown account.
Learn more
Lesson: Stop loss, target and R
Guide: Forex risk management for beginners
Related terms: Take profit · Risk to reward ratio · R (R multiple)