Stop loss and take profit, placed before you buy
Both exits belong in the market at the moment you enter. Everything that goes wrong afterwards goes wrong in the gap between deciding and doing.
Last updated 2 August 2026
Size the stop from the chart, not from your nerve
A stop belongs at the price that proves the setup wrong — below the floor the entry was taken at, allowing for how far price has typically moved against comparable entries before working. On the measured overshoot entries used here, that adverse move was usually under 6%, so a 2% stop is not tight risk management; it is a guarantee of being shaken out of trades that were going to work.
Getting the position size right is the other half: decide what a full stop-out costs you in money first, then let that decide the number of shares.
Place the target as a resting limit order
A take-profit you intend to enter manually when the price arrives is not a plan. Resting it in the market at the level you nominated is how the arithmetic you built the trade on actually gets realised, and it means a spike through your target during a session you slept through still fills.
Attach both to the entry with conditional orders
Most brokers will accept an entry with a take-profit and a stop attached, so the exits arm automatically once the buy fills and cancelling one cancels the other. If you connect a broker here, the review screen shows the entry and both legs together before anything is sent, and the resting orders then live at the broker — nothing on our side needs to be running for them to work.
Trailing stops are worth knowing about but change the strategy: they convert a measured target into "ride it until it turns", which has a different and usually worse hit rate on setups measured for a fixed target.
The two mistakes that undo all of it
- Moving the stop down to avoid being stopped out. That converts a measured loss into an unmeasured one.
- Taking profit early because the position is up. The target was chosen with a hit rate attached; leaving before it invalidates the number you sized the trade on.
More on exits: when to sell a stock.
Read next
- When to sell a stock
- Dollar cost averaging, price by price
- A swing trading strategy you can state in five lines
- All guides
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