Lessons › Why traders lose › Why your stop loss gets hit
World 11 · Why traders lose · lesson 1 · level 2
Why your stop loss gets hit
Stops get hit for four plain reasons: the obvious level, a stop tighter than normal noise, a size that is too big, and moving it.
In one line
Your stop loss is not being hunted. It gets hit for four boring reasons.
Explained simply
A stop loss is the price where you give up on a trade. If you put it exactly where everyone else puts theirs, or so close that normal wiggles touch it, it gets hit even when your idea was fine. In 1,814 real setups we checked, the stop was hit first 54% of the time. So where you put it, and how much you bet, matter a lot.
Mistakes to avoid
- Putting the stop one tick under the last low, where everyone else's stop sits.
- Using a stop smaller than a normal candle, like 0.3% on an hourly Bitcoin chart that moves about 0.7% an hour.
- Buying so much that the only stop you can afford is a bad one.
- Moving the stop further away when price gets close.
Check yourself
In 1,814 real setups in our library, how often was the stop hit before the target?
About half the time. 54% hit the stop first and 33% hit the target first. Stops getting hit is normal, so the size of each loss is what you control.
Bitcoin moves about 0.7% in a normal hour. What is a 0.3% stop on an hourly chart like?
A coin toss: hit about as often as the target. On 12,926 real Bitcoin hours, a 0.3% stop and a 0.3% target were each hit first about 41% of the time.
Why do so many stops sit just under the last low?
It is the obvious spot, so many traders pick it. The last low is easy to see, so stops pile up there. One tick below it takes them all out.
Your position is so big that you can only afford a 0.5% stop. What do you fix first?
Make the position smaller. Fix the size first. A smaller position lets the stop sit where your idea is wrong, for the same dollar risk.
Price is near your stop. Moving the stop further away mostly changes…
How much the loss costs, not how often it happens. Moving the stop does not make it right more often. It makes the losses that do happen bigger.
Goal of this lesson: Name the four reasons a stop gets hit and fix the first one on your next trade.