How do you set stop-loss correctly?

The decision on where to place your stop-loss isn't solely based on the direction of your trade. It's also influenced by your trading style and risk appetite. Some traders prefer tighter stop-losses to minimize potential losses, while others may opt for wider stops to allow for more market volatility.

When embarking on a trading strategy, it's crucial to determine your position, whether it's long or short. For those aiming to go long, the placement of the stop-loss order is essential to minimizing potential losses.

For experienced traders, they may incorporate technical analysis tools to identify key support and resistance levels, which can serve as potential stop-loss placement points. These levels often signify areas where the market may reverse, making them strategic positions to minimize risk.

Additionally, it's important to regularly review and adjust your stop-loss orders as market conditions evolve. A stop-loss that was appropriate initially may no longer be effective as the market moves, necessitating its relocation to reflect the current market landscape.

In a long position, the stop-loss should ideally be positioned below the current market price. This ensures that if the market moves against your position, your trade will be automatically closed at a predetermined level, limiting your downside risk.