What is Stop Loss?
Stop Loss: A stop loss is a pre-defined price level at which a losing trade is automatically exited to limit the maximum loss on that position.
Full Definition
A stop loss is a risk management order placed at a specific price below (for long positions) or above (for short positions) the entry price. When the market reaches this level, the position is exited, capping the loss at the intended amount. Using stop losses consistently is one of the foundational habits of profitable trading — it prevents small losses from becoming catastrophic ones.
Impact on Your Trading
Traders who consistently use stop losses survive to trade another day. Those who don't — holding losing positions hoping they'll recover — face the risk of devastating losses that can take months or years to recover. 'It'll come back' is one of the most expensive sentences in trading.
For Indian Traders
In Indian F&O markets, stop losses are critical because options can go to near-zero value quickly, especially during sharp intraday moves on Nifty or Bank Nifty. For futures, without a stop loss, a gap against your position can cause losses far exceeding your original risk.
How to track this in your journal
Track 'stop loss adherence rate' in your journal — the percentage of trades where you actually exited at your planned stop loss. Most traders who journal discover their stop loss adherence rate is far lower than they thought.
Frequently Asked Questions
Where should I place my stop loss?▼
Stop loss placement should be based on technical levels (support/resistance, recent swing lows/highs) rather than arbitrary percentages. Place it at a level where, if reached, your original trade thesis is invalidated. Then calculate your position size based on this stop loss distance.
Track Stop Loss in your journal
Use Trade Prom to monitor how stop loss affects your trading results.
Start Free Journal