Stop Loss Framework
Learn how stop losses, invalidation and risk planning work together.
Define an invalidation level
A stop order is intended to reduce a position when a trigger condition is met. It is useful to distinguish the trigger price from the eventual fill price. Fast moves and thin liquidity can produce execution away from the trigger.
Stop-market versus stop-limit
A stop-market prioritizes execution after triggering, with price uncertainty. A stop-limit sets a limit price but may remain unfilled when the market moves beyond it. Available order types and trigger-price choices depend on the exchange.
Connect stop distance to quantity
If entry is 100 and the invalidation level is 95, price risk is 5 per unit. A 10 USDT price-only budget supports 2 units. Include costs and slippage in the broader plan. Moving the stop farther away without reducing quantity increases risk.
Budget for an execution gap
Hypothetical worked example. For a hypothetical long of 2 units entered at 100 with a stop at 95, intended price loss is 10. If a stop-market order fills at 94, price loss is 12 before fees. A stop-limit order avoids some price uncertainty but can remain unfilled.
Should position size use the score?
The current sizing calculator uses balance, risk budget, entry and stop distance. The scanner score does not measure execution risk and should not be treated as a guaranteed protection level.
Verify the assumptions
Check the input window, fees and data availability before applying this example. For the exact software behavior and coverage limits, read the scanner methodology. Examples explain arithmetic and interpretation; they are not historical performance claims.