1. What Is Stop Loss And Take Profit?

A stop-loss (SL) is a predetermined price at which a trader will exit a losing position to limit losses. Take-profit (TP) is a predetermined price at which a trader will exit a winning position to lock in profits.

2. How The Calculator Works

The calculator uses these formulas:

Where:

• Stop Loss Distance — Absolute difference between entry and stop-loss price
• Take Profit Distance — Absolute difference between take-profit and entry price
• Risk Amount — Maximum amount you're willing to lose on the trade

3. Importance Of Risk Management

Details: Proper risk management helps traders preserve capital and maintain consistency. A common rule is to risk no more than 1-2% of your account on any single trade.

4. Using The Calculator

Tips: Enter your entry price, stop-loss price, take-profit price, and the dollar amount you're willing to risk. The calculator will determine your optimal position size.

5. Frequently Asked Questions (FAQ)

Q1: What's a good risk-reward ratio?
A: Many professional traders aim for at least 1:2 or 1:3 risk-reward ratios.

Q2: Should I adjust my stop-loss after entering a trade?
A: You can trail your stop-loss to lock in profits as the trade moves in your favor, but avoid moving it further away.

Q3: How do I determine my risk amount?
A: Risk amount is typically a percentage of your total trading capital (1-2% is common).

Q4: What if my broker uses lots instead of units?
A: Convert the position size to lots based on your broker's lot size (standard lot = 100,000 units).

Q5: Does this work for all markets?
A: The principle applies to all markets (forex, stocks, crypto), but position sizing may need adjustment for different instruments.