Newbie Stop Loss Question

Ljhoward84

Newbie
1 0
Hi all,

I'm new to the forum and to the world of trading and am hoping someone can shed a bit of light on a stop loss headache i have. I'm currently playing around with a virtual etoro account and using the free version of trading view for charting (this won't be my permanent "setup" but it will do for now!) I'm primarily looking at stocks and crypto, not so much forex. My question is to do with calculating stop loss in relation to risk.

I understand that you should only ever look to risk 1-2% of your account per trade. I took this rule of thumb as referring to the actual size of the trade. For example, if i had a $10,000 account then the largest trade i should ever look to open would be $100 (based on 1% risk).

However, if i was to set a stop loss to kick in when, for example, the trade loses 10% then in fact i'm not actually risking 1% of my account with the trade, I'm only risking 0.1% (because in this example $100 trade the worst i'll ever lose is $10, the other $90 is protected by the stop loss).

Have i misinterpreted the concept of "Only risk 1-2% per trade"? Is this guidance based on the assumption that you don't always use a stop loss (in which case, the whole $100 / 1% is "at risk")?

Any assistance would be warmly received. I'm sure it's an easy answer but I'm having one of those days!!

Thanks in advance

LJ
 
Last edited:

Stuart Cubech

Newbie
2 2
You would place you stop loss at the point where it would lose your 1% (or whatever % is your max loss for that trade).

You must also then think about your next trade if you've lost, because if you lose 1% you need 1.01% to break even. This looks small so think of it on a bigger amount ; lose 10% and you need 11.1% to break even; lose 20% and you need 25% to break even etc...
 
  • Like
Reactions: tomorton

momo3HC

Active member
182 54
Your risk percent (1% in example) equals the sum which you will lose if your SL is hit. I hope it`s clear enough.
 
 
AdBlock Detected

We get it, advertisements are annoying!

But it's thanks to our sponsors that access to Trade2Win remains free for all. By viewing our ads you help us pay our bills, so please support the site and disable your AdBlocker.

I've Disabled AdBlock