How to Use Stop-Loss and Take-Profit Orders
Master stop-loss and take-profit orders. Learn where to place them, how to size risk, and the bracket setups that protect capital and lock profits.
Key Takeaways
- •Use a predefined risk amount per trade (e.g., 1% of account)
- •Place stops where your trade thesis is invalidated, not at round numbers
- •Bracket orders automate stop-loss + take-profit and remove emotion
Why SL/TP matter
Stops cap downside; take-profits systematize exits so wins don't evaporate. Together, they turn a good entry into a complete plan.
Where to place your stop (3 frameworks)
%-Risk
Beginner-friendly.
Example: Risk $100; if entry is $50 and stop is $48, you can buy 50 shares.
Volatility (ATR)
Stop at 1.5–2× ATR from entry to allow normal noise.
Structure
Place below support/swing low (longs) or above resistance/swing high (shorts).
Take-profit methods
Bracket orders (set-and-forget)
Enter with a linked stop-loss and take-profit. If one fills, the other cancels automatically (OCO).
Mistakes to avoid
- •Stops too tight for the timeframe's volatility
- •Moving stops away to "avoid being wrong"
- •Skipping stops on earnings or illiquid names
Step-by-step (generic broker)
- 1.Choose order type (often limit)
- 2.Set entry price
- 3.Add stop-loss (price & quantity)
- 4.Add take-profit (price & quantity)
- 5.Review risk $, submit
Ready to Practice?
Add a 2R/1R bracket template in your broker and use it on your next demo trade.
Frequently Asked Questions
Do stops guarantee price?
No—gaps can fill worse than your stop level.
Trailing or fixed?
Trail in trends; fixed in range conditions.