Stop Loss (SL) in Forex

A stop loss (SL) is a protective order or predefined exit level intended to close a position when price reaches a point where the trader no longer wants to accept additional loss.

Why Use a Stop Loss?

A stop loss helps turn an undefined risk into a planned risk.

Before entering, the trader can decide where the trade idea becomes invalid and use that level to calculate position size.

A Stop Does Not Guarantee the Exact Price

When a stop is triggered, actual execution can differ from the stop price because of spreads, gaps, liquidity, and slippage.

This is especially important during fast markets and major news events.

Where Should a Stop Go?

A stop should be connected to the trading idea.

Placing it at a random distance simply to create a desired position size can result in a level that has no relationship to market structure.

Do Not Move Risk Emotionally

Moving a stop farther away simply because a loss feels uncomfortable increases the amount of risk after the trade has already gone wrong.

Any stop adjustment should follow a predefined rule.

Key Takeaway

A stop loss defines where a trade should be exited when the idea is invalid. It limits planned exposure, but the final fill price can still vary.