We have already discussed in previous articles how important the stop loss is. For those who are not yet clear on the subject, the stop loss will be that price level from which our trade would cease to be valid and should be closed.
The stop loss can be automatic and programmed in the broker itself or manual. In the manual stop loss the trader makes the final closing of the transaction after checking the price in the market.
Knowing how to define the stop loss is very important. Depending on the distance of the stop loss from the price, we will have more or less profitability in the trade, provided that we respect an efficient money management.
The stop loss, once defined, may have a double evolution.
On the one hand we can have a fixed stop loss that does not evolve with the price. This type of stop loss is normally used on transactions with a high Risk/Profit ratio, so we are going to look for a price target that is much farther from the stop loss level.