What percentage should a stop-loss be?

There is no single right percentage. A stop should sit where the trade idea is wrong, which depends on how much the stock normally moves. A 2% stop on a stock that swings 4% a day will be hit by noise; the same 2% on a slow stock may be generous. The ATR option in this calculator sets the stop from the stock's own typical range, usually 1.5 to 2.5 ATR for a swing trade.

What is ATR and why use it for stops?

Average True Range is the average size of a stock's daily move over a recent window, often 14 days. A stop placed a multiple of ATR away scales with the stock's volatility, so a calm stock gets a tight stop and a wild one gets room, without you guessing a percentage.

What win rate do I need to break even?

It depends on the reward-to-risk ratio. At 1R (reward equals risk) you need to win half your trades. At 2R you need one in three. At 3R, one in four. The calculator shows the exact number for your target, before fees.

Should I move my stop-loss?

Toward the entry as the trade works, yes, that is a trailing stop. Away from the entry to avoid being stopped out, no. Widening a stop after entry raises the risk on a trade that is already going against you, which is the opposite of what the stop is for.

Free Tool

Stop-loss calculator

Stop price = entry minus the stop distance for a long (plus it for a short). Set the distance as a percent, a dollar amount, or a multiple of the stock's average true range, and the calculator gives the stop, the targets at 1R to 3R, and the win rate you need to break even.

Direction

Entry price$

Stop distance as

Stop distance%Percent of the entry price between entry and stop.

Target reward-to-riskR2R means the target is twice as far as the stop.Shares (optional)To see the dollar risk and reward on the whole position.

Result

Stop at $95.00

$5.00 per share (5.00%) between entry and stop. Target at 2R: $110.00.

Risk per share: $5.00
Risk on 40 shares: $200.00
Reward on 40 shares at 2R: $400.00
Targets at 1R / 2R / 3R: $105.00 / $110.00 / $115.00
Win rate to break even at 2R: 33.3%

At 2R you need to win 33% of trades just to break even before fees. Everything above that is the edge.

Where a stop belongs

A stop-loss is the price at which the reason for the trade is gone. For a breakout that is below the level that broke out. For a pullback entry it is below the swing low. For a trade with no obvious level, the stock's own volatility is the honest guide, which is what the ATR method does: it puts the stop far enough away that a normal day cannot hit it, and no farther.

Formula

long: stop = entry - distance, target = entry + distance x R

short: stop = entry + distance, target = entry - distance x R

distance = entry x stop% | dollars | ATR x multiple

break-even win rate = 1 / (1 + R)

The break-even line is the number most traders never compute. A strategy that wins 55% of the time sounds good and loses money at 0.5R. A strategy that wins 35% of the time sounds bad and makes money at 2.5R. The stop distance and the target distance together decide which world you are in.

A worked example

Entry $100, 14-day ATR $2.40, stop at 2 ATR: $4.80 below, so the stop is $95.20. A 2R target is $109.60. On 40 shares that is $192 at risk for $384 of reward, and the trade only needs to win one time in three to break even. Switch the stop to a flat 2% and it moves to $98, inside the stock's average daily range, which means an ordinary day can take you out of a trade that was right.

Automating the stop

A stop that exists only in your head is not a stop. The gap between deciding on $95.20 and actually entering the order at $95.20 is where most of the damage happens, usually because the stock is already at $96 and the stop feels close. The fix is to send the stop with the entry, as one order, so the decision is made once, when you are calm. We wrote up how that works at each supported broker in how to automate stop-losses on Schwab, Alpaca and Tradier.

Done for you

JorgAI sends the stop and the target with every order it places.

Choose your stop rule and your reward-to-risk once. Each auto-trade goes to your broker with its stop-loss and profit target attached, the position is monitored around the clock, and every decision is logged with the numbers behind it. No stop is ever a mental one.

Set up your rules Size the position for this stop

Free to start. A two-minute setup quiz builds your rules. Your money stays in your own brokerage account.

Questions people ask

What percentage should a stop-loss be?: There is no single right percentage. A stop should sit where the trade idea is wrong, which depends on how much the stock normally moves. A 2% stop on a stock that swings 4% a day will be hit by noise; the same 2% on a slow stock may be generous. The ATR option in this calculator sets the stop from the stock's own typical range, usually 1.5 to 2.5 ATR for a swing trade.
What is ATR and why use it for stops?: Average True Range is the average size of a stock's daily move over a recent window, often 14 days. A stop placed a multiple of ATR away scales with the stock's volatility, so a calm stock gets a tight stop and a wild one gets room, without you guessing a percentage.
What win rate do I need to break even?: It depends on the reward-to-risk ratio. At 1R (reward equals risk) you need to win half your trades. At 2R you need one in three. At 3R, one in four. The calculator shows the exact number for your target, before fees.
Should I move my stop-loss?: Toward the entry as the trade works, yes, that is a trailing stop. Away from the entry to avoid being stopped out, no. Widening a stop after entry raises the risk on a trade that is already going against you, which is the opposite of what the stop is for.

Keep reading

These tools are for education. They do not know your account, your taxes or your broker's exact fees, and nothing here is investment advice. Trading involves risk of loss.

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