Stop-Loss Methods: Static, Trailing, and Exchange-Placed Stops
Summary
This guide explains static and trailing stop losses, including trailing stops that switch to a tighter loss allowance after a profit threshold or begin trailing only after a specified offset. It also covers exchange-placed stops, comparing market orders, which prioritize exiting, with limit orders, which constrain price but may not fill. Exchange settings can determine trigger price type in futures, the limit offset, and how often the bot updates or replaces a stop.
The examples show how stop levels move with price and how leverage changes the underlying price move associated with a given amount of trade risk. The document cautions that tight exchange limits can miss fills, while very wide stops may violate venue restrictions and trigger a fallback exit. Stop behavior depends on configuration, exchange capabilities, fees, and whether a trailing stop has already adjusted; the guide provides operating rules rather than evidence that any particular stop setting improves returns.
Key ideas
- A static stop triggers an exit when loss crosses a configured threshold, while a trailing stop can move upward as price rises.
- A positive trailing threshold or offset can delay tighter profit-protecting stops until the trade reaches a chosen level.
- Exchange market stops favor exit execution, while exchange limit stops risk remaining unfilled after a sharp move.
- Stop settings must fit exchange support and price-trigger rules, especially in futures markets.
- Leverage magnifies the effect of price moves on the trader’s capital, so stop distance should be considered in risk terms.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.