Module 4 — Risk & position sizing
Stop losses and invalidation
6 minute read
In plain English
A stop is the price at which your reason for being in the trade is no longer true.
Why it matters
Without a pre-defined invalidation, a small loss becomes an account-sized one.
Example
If you entered because price held $2.90, then $2.84 says you were wrong.
Try this
Write the invalidation price before the entry price for your next ten paper trades.
Common mistake
Moving a stop further away because price is approaching it.
What this does not mean
A stop does not cap your loss in a gap or a halt.
Educational content only. Not financial advice.