A stop loss is your safety net — an order to exit a trade when it moves against you. Choosing the right stop loss type can significantly impact your strategy's performance and protect your capital.
Golden Rule: Never enter a trade without knowing where you'll exit if you're wrong. Hope is not a strategy.
1. Fixed Percentage Stop Loss
Exit when price drops a fixed percentage from your entry.
Example: Entry price: ₹100 Stop loss: 5% Exit triggered at: ₹95
| Pros | Cons |
|---|---|
| Simple to implement | Doesn't adapt to volatility |
| Predictable risk per trade | May be too tight for volatile stocks |
| Easy to calculate position size | May be too wide for stable stocks |
Best For:
- Beginners who need clear rules
- Position sizing based on fixed risk
- Stocks with consistent volatility
2. Trailing Stop Loss
The stop moves up as price moves in your favor, locking in profits.
Example (5% trailing stop): Entry: ₹100 → Stop at ₹95 Price rises to ₹120 → Stop moves to ₹114 Price rises to ₹130 → Stop moves to ₹123.50 Price drops to ₹123 → EXIT (locked in 23% gain)
| Pros | Cons |
|---|---|
| Locks in profits automatically | Can exit during normal pullbacks |
| Lets winners run | May leave money on the table |
| No need to predict targets | Requires price to move favorably first |
Pro Tip: Use a wider trailing stop (7-10%) for trending stocks and tighter (3-5%) for range-bound stocks.
3. Indicator-Based Stop Loss
Exit based on technical indicator signals rather than fixed percentages.
Common Indicator Stops:
| Indicator | Stop Condition | Best For |
|---|---|---|
| SMA | Close < SMA 20 | Trend following |
| Supertrend | Close < Supertrend | Indian markets |
| ATR | Price drops 2 × ATR | Volatility-adjusted |
| Bollinger | Close < Middle Band | Mean reversion |
| Pros | Cons |
|---|---|
| Adapts to market conditions | Stop level changes daily |
| Based on market structure | Risk per trade varies |
| Often catches major trend changes | Harder to calculate position size |
Warning: Indicator-based stops can be far from your entry. Always check the current stop level before entering a trade.
Choosing the Right Stop Loss
| Strategy Type | Recommended Stop | Why |
|---|---|---|
| Swing trading | Indicator (SMA, Supertrend) | Follows the trend |
| Momentum | Trailing stop | Captures extended moves |
| Mean reversion | Fixed percentage | Defines clear risk |
| Breakout | Below breakout level | Invalidates the setup |
Using Stop Losses in VivaTrades
VivaTrades supports all three types:
- Fixed: Add "Stop Loss %" exit condition
- Trailing: Add "Trailing Stop %" exit condition
- Indicator: Add indicator-based exit (e.g., Close < SMA 20)
Test different stop types to see which works best for your strategy.