Stop-Loss & Take-Profit
Two settings let the exchange exit your trades for you — capping losses and locking gains automatically. Here’s how stop-loss and take-profit work, and how to place them well.
Your two automatic exits
In Lesson 14 you learned to decide your exit before you enter. These are the two tools that actually enforce that decision — automatically, even while you sleep. A stop-loss caps your loss; a take-profit locks in your gain.
You set them once, and the exchange does the rest: stop-loss sells if price falls to your "I'm wrong" level, take-profit sells if price rises to your "I'm happy" level. No watching the screen, no emotional decisions in the heat of the moment.
Stop-loss saves you from yourself on the way down. Take-profit saves you from greed on the way up.
How to use them well
- Set the stop-loss first, always. Before the trade, decide the price that proves you wrong — and let it do its job without "just give it a bit more room."
- Place stops at logical levels — just beyond a support or resistance zone (Lesson 07), not at a random round number everyone can see.
- Aim for reward bigger than risk. If you're risking X to make X, you must be right more than half the time just to break even. Risking X to make 2X or 3X is the goal.
The most expensive habit in trading is moving your stop-loss further away because the trade's going against you — "it'll come back." Sometimes it does; the one time it doesn't, it takes your whole account. A stop you keep widening isn't a stop. Decide it once, honour it, move on.
A stop-loss auto-sells to cap your loss and a take-profit auto-sells to lock your gain — set the stop first at a logical level, aim for reward bigger than risk, and never widen a stop once it’s placed.