Stop-Loss and Risk/Reward: How to Protect Your Account

Not losing matters as much as winning. Stop-loss and risk/reward are tools that protect your account by deciding first “how much you’ll lose if you’re wrong.”

Stop-loss — your exit when wrong

When you buy, also set a stop price — “if it falls to here, I sell.” The key is to fix it as a rule before emotions get involved.

Risk/reward — picking winnable trades

Risk/reward is take-profit distance ÷ stop-loss distance. A 5% stop with a 15% target gives a ratio of 3 — one win offsets three losses. When the ratio is above 1, you can survive long term even with a win rate below 50%.

Let risk decide how much to buy

Decide how much of your account you’ll risk on one trade (say 2%) and your stop distance, and the right buy amount follows. Calculate your stop, risk/reward, and buy size together.