Stop loss and take profit: how to plan your exit before you enter

By the Ezetrad team · Updated 13 November 2026 · 2 min read

Most losing traders do not lose on their entry. They lose because they never decided where to get out. A stop loss and a target fix that before you risk anything.

The stop loss

A stop loss is the price where you admit the trade was wrong and get out. You choose it before you enter, so the loss stays small and known. A stop placed too close gets hit by normal price noise; one placed too far means each loss is large.

The take-profit target

A take-profit (target) is the price where you collect your win. Without one, many people watch a winning trade turn into a loser while hoping for more.

Reward to risk: the R multiple

Divide the distance to your target by the distance to your stop. If you risk $10 to make $20, the reward-to-risk is 2R. This one number decides how often you need to be right:

The formula is 1 ÷ (1 + R), before fees. Bigger targets need fewer wins but are reached less often, so there is no free lunch.

Where to put the stop

• From the coin's usual move: if a coin usually moves 3% a day, a 1% stop on a one-day idea will likely be hit by noise. Our chart page shows each coin's typical move for your time window.
• From the chart: below a recent low for an up idea, above a recent high for a down idea.
• From volatility: a multiple of the average true range (ATR), as our bots do (1.5× ATR).

Test before you trust

On Ezetrad's chart page you can set a stop and target and see how often, in 10,000 replays of the coin's recent history, the target came first. It is a simulation of the past, not a forecast, but it quickly shows whether a plan is close to a coin flip.

This guide is educational and is not financial advice.

Keep learning

• How to read candlestick charts
• What is RSI?
• Position sizing and the 1% rule
• Moving averages explained