In one lineA stop loss limits the planned downside. A take-profit level defines a planned objective.
Place the stop where the idea no longer makes sense
A stop should not be chosen only because a round number looks convenient. It should connect to the logic of the trade and the amount you are prepared to risk.
Example
Entry: 1.1000
Stop: 1.0975
Target: 1.1050
Risk = 25 pips • potential reward = 50 pips
Stops are risk tools, not guarantees
During gaps or fast markets, execution can differ from the requested stop price. That is one reason position size should still be sensible.
Remember this
- Define the invalidation point before entry.
- Calculate position size from the stop distance.
- A target is an objective, not a promise.
Educational content.
This lesson is provided for general educational and informational purposes and is not personal financial or investment advice.