Risk Management: Stop Loss & Take Profit

Why Risk Management Matters Most

In investing, controlling losses is more important than chasing profits. The math is simple:

The larger the loss, the harder it is to recover. This is why stop losses are crucial.

Stop Loss Strategies

Common Methods

1. Fixed Percentage — Stop at 5-10% loss
2. Technical Stop — Stop when price breaks support or moving average
3. Volatility Stop — Set distance based on ATR (Average True Range)
4. Time Stop — Exit if target not reached within a set period

Stop Loss Principles

• Determine stop loss before entering a trade
• Place stops at technically meaningful levels
• Don't move stops against your position (only in favorable direction)
• Execute strictly — no hoping for recovery

Take Profit Strategies

1. Fixed Target — Sell at predetermined profit target
2. Trailing Stop — Raise stop loss as price rises
3. Scaled Exit — Sell in 2-3 portions to lock in partial profits
4. Technical Exit — Sell on reversal signals

Position Sizing

The 2% Rule

Maximum loss per trade should not exceed 2% of total capital.

Calculation:

• Total capital: $100,000
• Max single trade loss: $100,000 × 2% = $2,000
• If stop distance is 5%, max position = $2,000 / 5% = $40,000

Manage Risk on AlphaDesk HK

• 🔔 Price Alerts [blocked] — Set stop loss and take profit alerts
• 📝 Trade Journal [blocked] — Record stop loss/take profit execution
• 📊 Performance Report [blocked] — Analyze your risk management performance

Disclaimer: This article is for educational purposes only and does not constitute investment advice.