Stops & Risk Management

Where stops go, how to size risk and how to survive gaps.

1. Where to Put a Stop — A stop belongs where your trade idea is proven wrong, not at a random dollar amount. Here is how to find that spot on a chart and why a small buffer matters.
2. Percentage vs. Technical Stops — Some traders use a fixed percentage stop; others use chart levels. Here is how each works, where each falls short and how many traders combine them.
3. ATR-Based Stops — Average True Range measures how much a stock typically moves in a day. Here is how it is calculated and how traders use it to set stops that fit each stock’s volatility, with real examples.
4. Stop Orders vs. Mental Stops — You can place a stop with your broker or keep it in your head. Here is how stop and stop-limit orders work, what a mental stop really requires and which fits which situation.
5. Portfolio Heat & Correlated Risk — Each trade’s risk can look small while the whole portfolio is exposed to one big move. Here is how to measure total open risk, and why stocks that move together count as more risk than they appear.
6. When Price Gaps Through Your Stop — A stop limits losses only if the stock trades near it. When price opens far below, the loss can be much bigger than planned. Here is a real example and how to prepare.