# Stop Loss Placement - 7 Methods Compared > How you place your stop loss determines both your risk per trade and how often the market hits it. Here are 7 methods compared honestly. **Tags:** stop-loss, placement, methods, risk-management **URL:** https://traderjournal.app/money-management/stop-loss-placement-7-methods-compared --- # Stop Loss Placement - 7 Methods Compared Stop loss placement is where money management and strategy intersect. Place the stop too tight and you get stopped out of trades that would have won. Too wide and you are giving up too much capital on losers. Here are the main placement methods with an honest assessment of each. --- ## Method 1 - Below/Above a Structural Level **How it works:** Place the stop just below a significant support level (for buys) or just above a significant resistance level (for sells). The logic: if the structure breaks, your trade thesis is invalid. **Best for:** Traders who focus on technical levels and structure. The stop is at a logical location defined by the market, not an arbitrary distance. **Limitation:** Stop distance varies with each trade depending on structure. Wide structures mean wider stops. Requires position size adjustment on every trade to maintain consistent risk. **Verdict:** The most logically sound approach for structure-based trading. --- ## Method 2 - Fixed Pip Stop **How it works:** Always place the stop at the same pip distance from entry regardless of structure. 30 pips, every trade. **Best for:** Strategies with highly consistent setups where the expected stop distance is relatively stable. Scalpers with very specific entry criteria sometimes use this. **Limitation:** The market does not know or care about your fixed pip distance. If the relevant structure is 20 pips away and you set a 30-pip stop, you are giving unnecessary room. If the structure is 50 pips away and you set a 30-pip stop, you may get stopped out prematurely. **Verdict:** Acceptable for very specific, rule-based strategies. Poor choice for discretionary structure-based trading. --- ## Method 3 - ATR-Based Stop **How it works:** Use the Average True Range (ATR) indicator to measure recent market volatility and set the stop as a multiple of ATR. Common: 1.5x ATR or 2x ATR below entry. **Best for:** Trend traders who want stops that adapt to market volatility. Wide volatility = wider stop, tight volatility = tighter stop. **Limitation:** ATR stops can be very wide during high-volatility periods, making position sizing calculations critical. **Verdict:** A sound approach that adjusts to market conditions automatically. Works well alongside percentage-based position sizing. --- ## Method 4 - Candle Low/High Stop **How it works:** Place the stop just below the low of the entry candle (for buys) or above the high of the entry candle (for sells). **Best for:** Price action traders who enter on specific candle patterns. The candle that triggered the entry defines the invalidation zone. **Limitation:** On higher timeframes, candle ranges can be large, requiring small position sizes to maintain risk percentage. **Verdict:** Clean logic for candle-pattern traders. Stop placement is objective. --- ## Method 5 - Time-Based Stop **How it works:** If a trade has not moved meaningfully in your favor within a specified time period, close it regardless of price. **Best for:** Day traders who want to avoid holding positions through sessions they were not meant to hold through. Also used in scalping to cut dead trades. **Limitation:** Not a primary stop loss method - does not define a price level where the trade is wrong. Best used as a secondary filter alongside a price-based stop. **Verdict:** A useful complement to price stops, not a replacement. --- ## Method 6 - Percentage of Entry Price **How it works:** Stop = entry price minus X% of the entry price. Used in equity trading more than forex. **Best for:** Stocks and indices where price levels scale with asset price. **Limitation:** In forex, pip distance is a more natural measure than percentage of entry price. EURUSD moving 1% from entry is very different from a $50 stock moving 1%. **Verdict:** Not the best fit for forex. Use pip-based or ATR-based methods instead. --- ## Method 7 - Mental Stop (No Stop Order) **How it works:** No stop loss order placed in the market. Trader monitors and exits manually at their predetermined level. **Best for:** No one in retail trading. **Limitation:** Slippage at manual exit, inability to react during news spikes, emotional barriers to executing the exit at the planned price, and catastrophic risk if the trader cannot monitor the position. **Verdict:** Do not use mental stops. A physical stop order is always in the market, always protecting you, even if your internet goes out. --- Track how your stop placement approach affects your actual realized R:R in Trader Journal's trade detail pages. Download at android.traderjournal.app or ios.traderjournal.app.