Stop Losses & Trailing Stops
The pre-commitment that caps every loss — placed by structure and volatility, honored without debate.
The Math of SurvivalAdvanced 6 min read· Lesson 3 of 5 in Risk Management
Initial stops
A stop marks where the trade's thesis is WRONG (below the support/pattern/pullback low that justified entry), padded beyond noise (ATR). Stops inside the noise band donate money to randomness; stops at the obvious round level join the crowd's liquidity pool — go a little beyond.
Trailing stops
As profit grows, ratchet the exit: under each higher swing low, under a rising 20MA, or a 2–3×ATR chandelier from the highest close. Wider trails keep you in longer trends but give back more at the end — pick per strategy, not per mood. The Backtest panel's trailing_stop and exit_reason columns show precisely which mechanism ends each trade.
The discipline
Moving a stop AWAY from price converts a defined risk into an undefined one — the single behavior most correlated with blown accounts. The stop is a contract with your future panicked self; renegotiating mid-panic defeats its purpose.