Many traders place very tight stop losses hoping for “sniper entries.” It looks smart when it works once or twice, but over time this approach usually backfires.
Tight stop losses get hit often by normal market noise—small price spikes or pullbacks—before price continues in the predicted direction. This creates a string of losing trades, drains your account, and can push you to quit before you ever see consistent profits.
Example:
You might catch a clean downtrend on the chart. You enter a sell trade, but price spikes up slightly first. If your stop loss is too close, it gets triggered, and you lose—even if price then drops exactly as you predicted.
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Many traders place very tight stop losses hoping for “sniper entries.” It looks smart when it works once or twice, but over time this approach usually backfires.
Tight stop losses get hit often by normal market noise—small price spikes or pullbacks—before price continues in the predicted direction. This creates a string of losing trades, drains your account, and can push you to quit before you ever see consistent profits.
Example:
You might catch a clean downtrend on the chart. You enter a sell trade, but price spikes up slightly first. If your stop loss is too close, it gets triggered, and you lose—even if price then drops exactly as you predicted.
Why This Happens
Traders often place a trade first and only then decide where to put a stop loss. They chase price action near the entry point instead of placing stops based on actual market structure or volatility.
This means your stop is positioned where random fluctuations can easily hit it, rather than beyond meaningful price levels.
A Better Way: Percentage-Based Stop Losses
Instead of picking an arbitrary small distance, use a percentage stop loss based on the current price.
How it works:
- Choose a percentage (e.g. 1%) of the price as your stop loss distance.
- On MetaTrader 5, select the crosshair tool and drag from the entry point to where your stop loss would be.
- At the end of the crosshair line, you’ll see the distance in pips and percentage. Place your stop loss at about 1% below (for buys) or above (for sells) your entry.
Why this helps:
- Most currency pairs move only 0.5% to 2% in a full day.
- A 1% stop gives your trade space to breathe while still limiting risk.
- It prevents small price spikes from wiping out trades too early.
Backtest Example With a Trading Robot
Using a range breakout Expert Advisor (EA), the difference becomes clear:
- With a 0.2% stop loss, most trades ended as losses because even minor reversals hit the stop.
- With a 1% stop loss, many of the same trades survived pullbacks and turned profitable.
This shows that slightly wider stops can drastically improve win rates.
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Stop Losses Are for Protection, Not Prediction
On a 5-minute chart, a 1% stop might look far from your entry, but on higher timeframes it’s often reasonable.
Also, in this strategy, trades are closed manually or by the system at the end of each trading day. The stop loss isn’t meant to get triggered often. It’s there only to protect your account if the market moves sharply against your analysis.