You know, many beginner traders make the same mistake — they open a position but don’t know how to properly set a stop loss and take profit. It’s like swimming without a life jacket. I’ve long realized that these two levels determine whether you’ll be profitable or lose your deposit.

First of all, you need to honestly ask yourself: how much am I willing to lose on a single trade? Most experienced traders follow the rule of risking 1-2% of their capital. This isn’t just a number — it’s your safety cushion. If you risk more, sooner or later one bad trade will wipe you out.

Now, about the most important part — how to correctly set stop loss and take profit. Support and resistance levels come to the rescue here. These are price zones where the price often reverses. When you enter a long position, it’s logical to place the stop just below support, and the target profit just above resistance. For a short position, it’s the mirror — stop above resistance, profit below support.

There’s a tool called risk-to-reward ratio. I usually aim for 1:3, meaning I’m willing to risk one unit to make three. This means that out of ten trades, I can be wrong in four and still stay in profit. That’s why this ratio is so popular.

A practical example: entry at $100 long, support at $95, resistance at $110. If I set a stop at $95 ( risking $5), then the profit target should be at $115 ( profit of $15). For a short position, the reverse scenario — entry at $100, resistance at $105, support at $90. Stop at $105 ( risk of $5), profit at $85 ( profit of $15).

Many traders use technical indicators for clarification. RSI shows overbought conditions, ATR helps assess volatility and more accurately calculate stops, moving averages confirm the trend. But honestly — to properly set stop loss and take profit, support and resistance levels plus a basic understanding of risk are enough.

The main thing I’ve learned over years of trading is that levels are not static. The market changes, and you need to regularly review your entry and exit points. Every trade is a lesson. Over time, you’ll learn to intuitively understand where to place these levels, and your percentage of profitable trades will significantly increase.