Stop losses are key. But you must master them before they begin to add value. Blindly throwing them is a sure way to get chopped up. Here are some tips. If you have any please add them!

Rule 1: Always place a stop loss when you make a trade (not a long term investment). It can be physically entered or kept in your own mental log

This forces you to think and respect invalidation

Rule 2: Your stop loss shouldn’t be too tight. I like to look at things like volatility, recent sizes of wicks, etc. If your trade is so narrow that RANDOMNESS can beat it, then it’s not a good trade

Rule 3: You should manage your stop loss. The reality is things change. Be flexible if the conditions change... Sometimes your best adds (to a trade) are damn near your stop loss...but this goes with Rule 4

Rule 4: Dont be emotional. Rule 3 is where you can add a ton of value, but you can’t manage your stop losses based on emotion (aka not wanting to realize a loss, hope or any other behavioral bias). If you do this you are toast. Must use rules and logic

Pro tip 1: if you’ve done 1-4 then adding to your trade near your stop loss is often the best trade you can make. Yes it can be wicked (Rule 2) but it’s often your highest risk/return trade

Pro Tip 2: scale, scale, scale. Don’t blow your wad entering a position and don’t nuke out of your position. Trading is all about ranges. Your stop loss is best as a range too. If it’s a wick, you are way better losing part of your position than losing the entire thing

Rule 2 v Pro Tip 1 v Pro Tip 2: think tightness of enter range vs tightness of SL range. The last edge of enter range vs first edge of SL range, by definition, will be tighter than the overall range. That’s ok since you should have SLs placed throughout your SL range