Exit rules placed as orders beat exit rules kept in your head. This indodaxcom.com guide explains stop-loss and take-profit orders, and the failure modes of each.
A stop-loss sells automatically if price falls to your level — capping the damage of being wrong. A take-profit sells at your target — locking a result without watching the screen. Both are resting orders in the book; both have failure modes: stops can slip through gaps, targets can sit forever while the trend runs away.
Set stops below levels that would prove your thesis wrong, not at a round number just below entry — obvious levels are where stops get hunted. Size positions so the stop distance costs an amount you planned to risk. Take-profit levels deserve the same justification as entries.
The classic failure is moving the stop further away as the loss grows — converting a planned small loss into an unplanned large one. The rule that survives contact with the market: the plan changes at the review, never during the position.
A concrete setup: entry 100, stop 94, target 112 — two units of planned risk against a planned three-unit reward. The position size is chosen so that the 6-unit worst case is a shrug. The plan neither guarantees the reward nor prevents the loss; it guarantees the loss stays at six.
The difference between planned and realized exits shows up in the records: stops filled during a wick print a worse average than the level on the chart. Backtesting that includes slippage is what separates plans that survive from plans that only work in spreadsheets.
- Will my stop always execute at my price?
- In fast markets the fill can be worse than the stop price — that is slippage, covered in our execution-cost guide. Stops reduce damage; they do not guarantee prices.
- Should I use both at once?
- Many platforms support bracket orders (stop plus target together). It automates the discipline; the harder part is choosing honest levels.