[AUTHOR: Arthhwise Team] [DATE: Published May 26, 2026, Last Updated May 26, 2026]

Stop-Loss Orders Guide

A stop-loss is an exit rule that protects your account when the market moves against you. It is not a “prediction tool”—it’s a survival tool.

What is a stop-loss?

A stop-loss is a predefined price (or rule) where you exit to cap the maximum loss on a trade.

Why stop-loss matters more than entry

Good traders focus on:

• how much they can lose
• how they exit wrong trades
• how they avoid account blow-ups

You can survive many mistakes if losses are small. You cannot survive if one trade wipes out weeks of gains.

Where should you place a stop-loss?

Use invalidation, not “random percentage.”

Examples:

• below a recent swing low (for long trades)
• above a recent swing high (for short trades)
• below/above a key support/resistance level

If price breaks the level that made your trade idea valid, your idea is invalid—exit.

The biggest beginner mistake: stop too tight

If your stop-loss is too tight:

• you get stopped out by normal volatility
• you re-enter worse (chasing)
• you lose confidence in good setups

Fix this using position sizing: widen the stop if needed, but reduce quantity so risk stays fixed.

A simple risk framework (easy to follow)

1. Choose risk per trade (example: 0.5%–1% of portfolio)
2. Decide stop-loss based on invalidation
3. Calculate quantity so the ₹ risk stays fixed

This turns trading into a controlled business decision.

Paper trading exercise

For the next 20 trades:

• write your stop-loss before you enter
• record if you followed it
• note how often “moving the stop” caused bigger losses

Your future self will thank you.