Are you properly cutting losses? ~About extremely important loss-cutting~

Hello! This is SAKU!

In previous articles we have learned the basics of technical analysis and line analysis, but today I’d like to focus on risk management—specifically, stop losses, which are important in any analysis method or theory!

At first, it’s natural to focus on entries, but please never think you can win if you neglect this!

What is a Stop Loss

A stop loss, as the name suggests, is to cut off a position that is in loss.

In other wordsto lock in the loss.

It is also called a stop or stop loss. This time, I’d like to look at how to think about stop losses.

Stop Loss in Trading

First of all,as long as you trade, stop losses are unavoidable.

Even the strongest traders have had to stop out at times.

No method is perfect—stop losses are used with even the best methods.

There is no absolute method in trading.

There is no 100% winning method, the so‑called “holy grail.”

So, inevitably, there are times when you must stop out.

Since trading involves both winning and losing stop losses are part of the methodandnecessary costto bear.

Is “Stop Loss” = “Loss”?

When you hear “stop loss,” it tends to carry a negative image.

After all, money actually decreases.

If money decreasing equals “loss,” then stop loss would be a “loss.”

However, if you can stop out appropriately, you can prevent even greater losses.

By stopping out, you can limit damage in situations where you might otherwise incur an enormous loss.

A stop loss is a means to“protect your capital from decreasing any further”.

Stop losses are also called Protective Stop.

If you entered with solid reasoning and stopped out, that isn’t “just a loss” but rather a proper strategy called“stop loss.”.

Conversely, stop losses should be placed at a point where the basis or scenario for your entry is about to break down..

So where is the place where the basis or scenario for entry breaks down?

This depends on the method and post-entry scenario construction, so there is no single answer.

However, one thing common to all methods is that there is a reason to enter.

An entry with no basis is simply gambling.

Understand your method well,the drawdown up to this point is tolerable = if it goes beyond this, the initial story changes, and that is where you should stop out.

Don’t widen your stop just because you don’t want to lose, and don’t tighten it unnecessarily just because you don’t want a loss.

If the amount goes negative and you feel anxious, place a stop-loss order at entry to prevent moves, and don’t shift it later.

If you manually stop out, do so cleanly and decisively.

Wanting to shift the stop suggests the market context, grounds, or scenario construction before entry were not sufficiently solid.

Stop loss should be “not convenient” but “clean.”

So, for this time,my view on stop lossis written here in my own way.

Regarding precise placement of stop losses, you will learn them by studying technical analysis, and as your trading knowledge and skills improve, your perception and approach to stop losses will change, and you will know where you should stop out!

In fact, the moment you stop out well at a critical point brings more satisfaction than a win.

Trading isn’t about rejoicing over each single win or loss, but about overall profit.

What is indispensable to that is“stop loss”.

So that is all for this time!

In my e-book below, you’ll find not only stop losses but also capital management and position management explained in detail, from underlying concepts to concrete methods—please check it out!

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