Where to Put a Stop-Loss on a Daily Chart (and Why It Keeps Getting Hit)

Educational only. Not investment advice. Past signals don't predict future results.

Put your stop where the trade is proven wrong, not where the loss starts to feel uncomfortable. On a daily chart that usually means just past a recent swing low (for a long) or swing high (for a short), or past the level your rule is built on. Then size the position from that distance. If your stop keeps getting hit, it's usually one of these: it's too close to normal daily noise, it sits right where everyone else's stop sits, or you're checking a daily setup on an hourly chart.

Below I'll show how I pick the level and size from it. Then we'll look at two setups from my published record, one with a tight stop and one with a wide one.

Start with the question the stop answers

A stop answers one question: what would price have to do for this setup to be wrong?

For a long on a daily chart, the usual answers are:

• A recent swing low. If price breaks the last low the move was built on, the up-move is in doubt.
• The level the rule uses. A previous-day-low break, a moving average, the other side of a channel. If the rule says the setup is off below X, the stop goes a little below X.
• A volatility buffer. Some rules set the stop a multiple of the recent average daily range away, so normal swings don't knock you out.

For a short, flip it: above a recent swing high or above the rule's level.

Don't pick a round number just because 2% "sounds safe." The market doesn't care what you can stomach. It only knows where buyers and sellers stepped in before.

Size from the stop, not the other way around

A lot of people skip this step. Pick the stop first, then figure out how much to buy.

Say you're willing to lose $30 if the stop is hit:

A wider stop means a smaller position, so the dollar risk stays the same. If you tighten the stop so you can buy more, you'll probably get stopped out every other day.

Why your stop keeps getting hit

It's inside the normal daily range. If a coin routinely moves 6% a day and your stop is 2% away, an ordinary day can take you out even though nothing's wrong with the trade. Look at the last two or three weeks of candles. If the typical high-to-low range is bigger than your stop distance, the stop is too tight for that chart.

It's sitting where everyone else's is. Just under an obvious round number or exactly at yesterday's low is where a lot of stops pile up. Price often dips through that level and comes right back. Give it a small buffer past the level.

You're watching the wrong timeframe. A daily setup checked on a 15-minute chart will look like it's failing every few hours. If the rule runs on daily candles, judge it on the daily close. For crypto on my charts that's 00:00 UTC, which is 6:00 PM CT now that daylight saving time has ended.

You're moving it. Pulling the stop farther away when price gets close turns a planned small loss into an unplanned big one. If the level was right when you set it, leave it alone.

Two setups from the record

Both are daily-chart longs from late October, exactly as they appear in the published list on the record.

Tight stop: 1INCH-USD, PDHL rule, opened Oct 29

PDHL (previous-day high/low) goes long when a daily candle closes above the prior day's high and flips short when one closes below the prior day's low. The stop starts at the prior day's low.

The stop was close, and price went through it in one day. Because this rule exits on the daily close rather than at an exact price, the exit landed at 0.0833, well below the stop. The record shows a loss of -2.45R, about two and a half times the planned risk. That's what a tight stop costs on a coin that can move several percent in a session. It's also why close-based exits need a smaller position than the stop alone suggests.

Wide stop: ZEC-USD, 6F rule, opened Oct 28

6F is a Heikin-Ashi rule. It marks the last candle where the smoothed Heikin-Ashi candles changed color. It goes long when price closes above that candle's high and exits when price closes back inside its range. The stop starts at the low of the day before the breakout.

Price swung hard for the four days the trade was open. On Oct 30 it dipped to about the stop level intraday, then closed back above it. The trade still closed under entry, a loss of -0.44R on the record, less than half the planned risk. That exit came from the rule, when price closed back inside its range. A random daily swing didn't force it. The catch with a 10% stop is a smaller position.

Neither stop is "correct." They're different rules on different coins. Each one sits at a level that means something, and the position size matches the distance.

A quick checklist before you set a stop

1. Name the level that proves the trade wrong.
2. Put the stop a little past it, not exactly on it.
3. Compare the distance to the last few weeks of daily ranges.
4. Work out your position size from that distance.
5. Judge it on the daily close, not intraday wiggles.
6. Don't move it farther away once the trade is on.

FAQ

Where should I put a stop-loss on a long trade?

Below the level that would prove the setup wrong, usually a recent swing low or the level your rule is built on, with a small buffer past it.

How far should a stop-loss be from entry?

Far enough that a normal day's movement doesn't hit it. There's no fixed percentage. A slow stock might need 2%, a volatile coin 10% or more. Size the position to fit.

Why does my stop-loss get hit and then price goes back up?

Usually the stop was inside normal daily noise or at an obvious level where lots of stops cluster. Give it a buffer past the level and check it against recent daily ranges.

Should I use a tight stop to lose less?

A tight stop loses less per hit but gets hit more often, and close-based exits can still slip past it. The way to lose less per trade is a smaller position, not a tighter stop.

Can the loss be bigger than my stop?

Yes. Gaps, fast moves, and rules that exit on the daily close can all fill past the stop. Plan for that when you size.

See where the stops sit on live setups

Every chart and setup on alktrading.com is free to open. Pick a live card, find its stop on the daily chart, and ask what price would have to do to hit it.

Educational only. Not investment advice. Past signals don't predict future results.