There are two stop loss methods that traders often apply that is based on the percentage of price movement and the other is the ratio of risk to total trading capital.

For example, if the account is $ 100,000 and the price per share is $ 50, and if you buy 200 shares with a stop loss of $ 5, the parameters will be as follows:
  • Position size 10,000 $ = 10% capital
  • Stop loss 5 $ = 10% price
  • The total risk with stop loss limit = $ 1000 equivalent to 1% of total trading capital
Stop loss and risk tolerance are the two biggest determinants of the trading volume. If you have a small account and all are trading the same volume, the maximum risk allowed should be 1% to 2%. Because if it's bigger then the account drop can be huge. Not to mention risks such as spread problems or unfavorable news.


In fact, the trader should only let the stop loss fall between 1% and 2% of the total trading capital is best. For a stop loss of 1%, depending on the range of stop-loss prices, traders adjust their trading volume accordingly.

If you want to increase your stop loss to 2% of your total trading capital for every trade you make, you only need to double your trading volume. This is a way to keep your risk stable and also avoid the risk of ruining your account during a long losing streak. So, the higher the volatility, the wider the stop loss and the smaller the position size.

Note that for price action traders, always aim for the critical technical levels for placing stop-loss orders in that area and adjust the trading volume to match the risk tolerance level.
Another important consideration is the risk/reward (RR) ratio in a trading

Maintaining an RR ratio of 1: 2 or 1: 3 allows for much smoother transactions. Your stop loss should be less than the expected profit size. Suppose if your profit is equal to a 15% price move per trade then the average stop loss percentage should approximate a 5% price move. Your losses should, on average, be ½ or 1/3 of your profits to maintain a good RR ratio.

The figure below is the correlation between the RR rate and the winrate rate:

Looking at the picture above, it can be seen that the larger the winrate, the smaller the RR ratio. While to be profitable in the long term, traders need to aim for strategies with a high RR ratio. This means that a system with a low win rate but if the RR rate is high will be the system chosen by many traders for long-term trading in trading.

So the answer to the question "What is the best rate of loss?" are other questions and please try to answer all of the following questions:
  • How big is your trading volume?
  • What is the maximum loss percentage for capital loss so you can manage your risk of destruction?
  • What price fluctuations do you choose to trade-in?
  • What average return do you expect?
  • What is your target for the RR rate?
  • How large can you trade without compromising your ability to obey your trading plan?
Answering all these questions, you will find out how much loss rate is right for you.