Stop-loss strategies for forex traders

A stop-loss closes a trade automatically once the price moves a set distance against you. Where you place it decides both how often you are stopped out and how much each loss costs.

Fixed-distance stops

A fixed stop sits a set number of pips from your entry, such as 20 pips on every trade. It is simple and easy to size, but it ignores how volatile the pair is, so it can be too tight in fast markets and too loose in quiet ones.

Volatility-based stops

These scale the stop to recent movement, often using the average true range (ATR). A trader might place a stop 1.5 times the ATR from entry. Wider stops in volatile markets mean smaller position sizes to keep the same cash risk.

Structure-based stops

Here the stop goes just beyond a level that would show the trade idea is wrong, such as below a recent swing low for a buy. The distance varies trade to trade, so position size must be worked out each time. Use our position size calculator.

Trailing stops

A trailing stop moves with the price as a trade goes your way and stays put when it reverses, locking in some profit. Trails that are too tight tend to close good trades early.

Slippage and guaranteed stops

A normal stop becomes a market order once triggered, so in fast markets or over weekend gaps it can fill at a worse price. Some brokers offer guaranteed stops for a fee, which close at exactly your level. See forex order types.

Related: why stops can fill beyond their level is covered in slippage explained, and recording every stop you set is easier with a trading journal.