Setting a STOP LOSS is extremely important when opening a trade.
Here’s a short guide on what I would do when determining your stop loss.
So a stop loss is where you feel comfortable in having a certain amount of loss within a trade and how to not get liquidated in certain circumstances. Stop losses are not guaranteed safety nets if whatever trade you’re in takes a sharp move in the opposite direction.
This is completely up to you and your own risk levels. When I first started trading I never set any SL’s because I was naive to think that coins never went down. However, it’s important to look at the charts and see where previous support/resistance are, as this can be a good indicator of where a SL can be set.
If we look at the image below, we can see the red line is a previous level of support from where it bounced from the bottom.
The white line is our entry point as it’s on a secondary level of support, with the green line just below previous support levels.
The red line is set at previous levels of support, because 9 out of 10 times, if it breaks the support, there is a rapid downtrend to a new local low. You want to set your SL WITHIN your liquidation levels.
Many people say 5-10% for a stop loss is good, however, I find it more beneficial to take the extra 2 minutes of time to look at a chart and find that support level. Be careful tho, it’s risky to try and find the support your coin is going on a moon mission.
So, where should you place your SL at? In all honesty, it depends per coin. What my advice would be tho, is to have a look at the chart, and decide the ‘soft’ support. Once you have that, place your stop loss near that line. As always, don’t invest what you can’t lose, tho!