How It Works
Stop-losses are placed as conditional orders on an exchange. Types include: Market stop-loss (sells at market price once triggered — fast but can slip); Limit stop-loss (only sells at the specified price — risk of not executing if price gaps); Trailing stop-loss (moves up with price, only triggers on reversal — useful in trends). Placement requires analysis: too tight and normal volatility will stop you out; too loose and you accept too much risk.
Why It Matters for Investors
The mathematics of losses makes stop-losses essential: a 50% loss requires a 100% gain just to break even. Protecting capital is more important than capturing gains. Professional traders universally use stop-losses — the only debate is placement methodology. For leveraged positions, stop-losses are critical; without one, a 5x leveraged position can be liquidated with a 20% adverse move.
TRUE AI & Stop-Loss
Every TrueSignal from TRUE AI includes a calculated stop-loss level based on technical structure (support/resistance), volatility (ATR), and risk/reward ratio. TRUE AI can also help you calculate the correct position size given your account balance, stop-loss distance, and desired risk per trade.
Try This Prompt in TRUE AI
"I want to trade SOL at current price with $5,000 capital. Where should my stop-loss be and what is the correct position size to risk 2% of my capital?"
Related Terms
Ask TRUE AI About Stop-Loss
The world's first 360° agentic finance platform. Get real-time analysis, signals, and research — powered by DART AI infrastructure.
Try TRUE AI Free