Stop-loss, take-profit & breakeven

The exits matter more than the entry

Beginners obsess over where to enter. Professionals obsess over where to EXIT. Every single trade carries two exit prices, decided in advance: the stop-loss if you are wrong, and the take-profit if you are right. You met them in the last lesson; now we make them precise and add the two moves that separate amateurs from pros.

Reward-to-risk, measured in R

The distance from entry to your stop is one unit of risk, 1R. Everything else is measured in R. If your target is three times that distance away, the trade is a 3R trade: you risk one to make three. Reading this ratio BEFORE you click is the entire reason you place the exits first. (How much money one R should be is position sizing — that is Level 3. Here you are learning the tools.)

Breakeven: the risk-free trade

Once price has moved in your favour by about 1R, you can slide your stop-loss UP to your entry price. From that moment the trade cannot lose you anything — the worst case is a breakeven exit at zero. The same protective stop has become a breakeven stop (traders say "move to BE" or "go risk-free"). It is the single most reassuring move in trading.

Trailing stop: let winners run

A trailing stop follows price at a fixed distance behind it. As the trade extends, the stop ratchets along, locking in more and more profit, and it only closes you out when price reverses by that distance. It is how you ride a big move without guessing the exact top. (Also called: trail, dynamic stop.)

• Every trade gets an SL (if wrong) and a TP (if right), set in advance.
• 1R = entry-to-stop distance; judge reward-to-risk before entering.
• Move the stop to breakeven at ~+1R → the trade becomes risk-free.
• A trailing stop locks in profit and lets a winner run.
• How much to risk per trade is Level 3; these are just the tools.