When I first started trading, I took random exits. Some trades won, many didn’t—and I never knew why. Learning stop-loss (SL) and take-profit (TP) changed that. This guide is my simple, beginner-friendly way to set them the smart way.
What Is a Stop-Loss?
A stop-loss is the price where I’m happy to be wrong and exit. It limits my loss automatically if price goes against me.
What Is a Take-Profit?
A take-profit is the price where I lock in gains. It closes the trade automatically once my target is hit.
Why SL/TP Matter
- Removes emotion: I decide the plan before the trade, not during stress.
- Protects my account: One bad trade can’t blow me up.
- Makes results repeatable: Same rules, better consistency.
Where Do I Place SL/TP? (3 Easy Methods)
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Structure method (swing highs/lows)
For a buy, I put the SL below the recent swing low. For a sell, I put it above the recent swing high. TP goes at the next obvious level (previous high/low or a clear zone). -
ATR multiple (volatility-based)
If the ATR(14) on my chart is, say, 12 pips, I might set SL ≈ 1.5 × ATR = 18 pips. Then choose TP for at least 1:1.5 to 1:2 reward-to-risk. -
Fixed pips + target R:R
Pick a reasonable fixed SL (e.g., 20 pips) and aim TP at 1:2 (so 40 pips). Simple and clean for beginners.
Simple Example (Buy EUR/USD)
- Entry: 1.1000
- Stop-Loss: 1.0980 (risk 20 pips)
- Take-Profit: 1.1040 (reward 40 pips)
- Reward:Risk: 40:20 = 1:2
Position sizing idea: If my account is $200 and I risk 1% per trade, that’s $2. With a 20-pip SL, I need about $0.10 per pip → roughly a 0.01 lot (micro) on EUR/USD.
Short Trade Example
- Entry: 1.3050
- Stop-Loss: 1.3070 (20 pips)
- Take-Profit: 1.3010 (40 pips) → 1:2
Quick: How I Set SL/TP on Most Platforms
- When placing an order: There are boxes called “Stop Loss” and “Take Profit.” I fill them before I click buy/sell.
- After I’m in a trade: I open the position and choose “Modify/Edit,” then add SL/TP and confirm.
- Tip: Always check the spread around news—the stop can trigger easier if it’s too tight.
Common Beginner Mistakes
- No stop-loss at all.
- Moving the stop further away to “avoid” a loss.
- Stops too tight for the timeframe/volatility.
- Random TPs that don’t match structure or a target R:R.
- Trading into big news without adjusting risk.
My Pre-Trade SL/TP Checklist
- Do I know where I’m wrong? (clear SL location)
- Is my risk per trade ≤ 1–2% of account?
- Is the Reward:Risk ≥ 1:1.5 (ideally 1:2)?
- Does TP align with a realistic level (not a wish)?
- Any major news coming that affects this pair?
Tiny Visual (You Can Keep or Delete)
Example long trade: SL below entry, TP above entry with ~1:2 Reward:Risk.
Key Takeaway
I decide my risk first, place the SL where the setup is invalid, then set TP for at least 1:1.5–1:2. Simple rules keep me alive and growing.
Next in the series: Risk Management 101 — the 1% rule and position sizing.
