Stop Loss: Your Automatic Brake Pedal

School Elementary01/01/2026

By Iriss LeeFounder & Editor1 January 20263 years trading forex. Writes every KoboFX guide and review. Full profile →

Risk warning: No stop loss means one trade can wipe you. This is education, not financial advice.

A stop loss closes your trade automatically when price goes too far against you. It is your brake pedal.

Buy at 1.0800 with the stop at 1.0780, 20 pips below. If price falls there, the broker closes the trade. The loss stays near 20 pips — the brake holds.

What it does

You buy EUR/USD at 1.0800. You set stop loss at 1.0780 (20 pips below). If price falls to 1.0780, the broker closes the trade. Loss is limited to about 20 pips.

Without a stop loss, you watch the loss grow. Many beginners freeze and lose all money — a $10 account can vanish in one trade.

Where to place it

Below support for buys, above resistance for sells. See Support and Resistance: The Floors and Ceilings of Price.
Give it breathing room — not too tight (noise hits it), not too wide (risk too big).
Match it to the 1% rule. See The 1% Rule.

Common mistakes

No stop loss ("I will watch it") — you will not.
Moving the stop further when losing — this turns a small loss into a big one.
Placing it at a round number where many stops sit.

Practise on demo first. See How to Use a Demo Account Before Risking Real Money.

Right: the stop sits below support with room for wicks. Wrong: the stop sits on the line, where normal wick noise knocks it out.

Bottom line: Set your stop loss below support and never move it further, or you risk one trade wiping your $10. Related guides: Starting Forex as a Beginner.