Your stop-loss belongs where your idea is wrong

A stop-loss has one job: to take you out of a trade when the reason you entered no longer holds.

Invalidation first, size second

Start by asking "What would price have to do to prove this idea wrong?" If you bought because a swing low held, the idea is wrong when that swing low breaks. The stop goes just beyond it.

Only after the stop is placed do you calculate size. This is the reverse of the common habit of choosing a size and then squeezing the stop to fit a risk budget.

Account for noise

Levels are not exact. Add a buffer beyond the level — a fraction of the average true range (ATR) is a common, adaptive choice — so ordinary fluctuation doesn't close the trade.

When the stop is too far

If the logical stop is so far away that the position becomes tiny, that is useful information: the trade may not offer enough reward relative to its risk. Skipping it is a valid decision.

Moving stops

Moving a stop away from entry increases risk after the fact. Moving it toward entry (trailing) locks in progress but increases the chance of being stopped by noise. Decide your trailing rules in advance and record them in your strategy.

The R:R Calculator and Trailing Stop Calculator help test these decisions before you are in the trade.