Proper way to use stoploss?

<p id="isPasted">A stop loss order is an order to sell a security at a certain price (the stop price) if it falls below a certain price (the trigger price). Stop loss orders are used to limit losses on a trade.</p><p>There are two main ways to use stop loss orders:</p><ol><li><p>To protect profits: If you have a profitable trade, you can set a stop loss order below your current profit level to protect your gains. For example, if you bought a stock for $10 and it is now trading at $12, you could set a stop loss order at $11.50 to protect your $1.50 profit.</p></li><li><p>To limit losses: If you have a losing trade, you can set a stop loss order above your current loss level to limit your losses. For example, if you bought a stock for $10 and it is now trading at $8, you could set a stop loss order at $8.50 to limit your loss to $1.50.</p></li></ol><p>The stop loss order will be executed automatically if the trigger price is reached. For example, if you set a stop loss order at $11.50, your order will be executed if the stock price falls to $11.50 or below.</p><p>It is important to note that stop loss orders are not guaranteed to be executed at the stop price. If the market is moving quickly, the stock price may fall below the stop price before the order can be executed. This is known as slippage.</p><p>The amount of slippage that you experience will depend on the liquidity of the stock and the market conditions. If you are trading a highly liquid stock in a calm market, you are less likely to experience slippage. However, if you are trading a thinly traded stock in a volatile market, you are more likely to experience slippage.</p>

<p id="isPasted">A proper way to use a stop-loss involves having a clear strategy, using specific methods to set the stop-loss level, and exercising discipline to avoid emotional decisions. Common methods include using a fixed percentage, technical analysis indicators like moving averages or support/resistance levels, and dynamic trailing stop-losses.&nbsp;</p><p><strong>Strategies for setting a stop-loss</strong></p><ul><li>Percentage-based method: This is a simple and widely used approach, especially for beginners. You set a predetermined percentage of loss you are willing to accept on a trade. For example, setting a 10% stop-loss means you will automatically sell if the price drops 10% below your purchase price.</li><li>Volatility-based method: This strategy accounts for an asset's price fluctuations using an indicator like the Average True Range (ATR). It sets wider stop-losses for more volatile assets and tighter ones for less volatile ones, which can prevent you from being stopped out by normal market noise.</li><li>Support and resistance levels: Technical traders often place stop-losses based on these historical price markers. For a long position, you can place a stop-loss just below a significant support level, a price point where the stock has previously struggled to fall below. For a short position, you would place it above a resistance level.</li><li>Moving averages: This technique uses moving averages to set dynamic stop-loss levels. You might place a stop-loss slightly below a longer-term moving average, such as the 50-day moving average, to avoid exiting during minor pullbacks.</li><li>Trailing stop-loss: This dynamic type of stop-loss moves with the market price as it rises, locking in profits. For example, a 5% trailing stop-loss will adjust upward as the price increases but will not move if the price falls. This protects gains and limits risk. </li></ul>