Stop Loss Strategies

Fixed stop

A fixed stop is a price at which the trade exits — usually set as a percentage or ATR distance from entry. Simple, mechanical, and hard to game.

Trailing stop

A trailing stop moves as the trade moves in your favour, locking in profit. Trailing stops are fantastic in trending markets and terrible in choppy ones (they get 'ticked out' by noise).

Time-based stop

Exit the trade if it hasn't worked by time T. Useful for mean-reversion and short-term directional trades — if the move hasn't happened in N bars, the setup is stale regardless of price.

Volatility stop

Place the stop a multiple of ATR (Average True Range) below entry. Automatically wider in volatile regimes, tighter in calm ones.

The real rule

Every trade has a stop. No exceptions. The type of stop depends on strategy, but the existence of one is non-negotiable. This is a big part of why manual retail traders lose — the discipline to place stops in code rather than in memory.

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How Sleeping Trade approaches stop loss design and execution

Sleeping Trade sets and enforces stop losses in code. Once placed, a stop is not 'moved' to give the trade more room. This is the rule that manual traders break most often, and it is the rule that destroys the most retail capital.

Stop loss design is part of the strategy — fixed-percentage, ATR-based, or structural depending on instrument and setup. The user does not configure stop levels.

Frequently Asked Questions

Can I disable a stop loss on a trade I am confident about?

No. The system disallows manual overrides. This is the rule that protects capital.

What if a stop fires on a wick and the trade reverses?

It happens. Slippage and stop-out reversals are part of the cost of having stops at all. Over many trades, the protection outweighs the occasional false stop.

Are stops placed at the broker or at Sleeping Trade?

Both — the system tracks the stop level and places exit orders through your broker. Hard exits are sent to the broker.

Common stop loss mistakes manual traders make

The most common mistake is setting stops too tight to be wicked out by normal volatility. ATR-based stops solve this by sizing the stop to the instrument's typical noise.

The second most common mistake is mental stops that are never actually placed at the broker. The trade goes against the position, the trader hesitates, and the stop becomes a much larger realised loss.

Sleeping Trade places hard stops at the broker, sized by ATR, and does not move them. This is the simplest version of stop-loss discipline, and it is the version manual traders cannot sustain.