Stop-loss targets are used in trading to minimize potential losses by setting a predetermined price at which a trade will be automatically closed. The best way to set stop-loss targets is to use a combination of technical analysis and risk management strategies. Technical analysis involves analyzing past price trends and patterns to predict future movements, while risk management involves determining the amount of risk that is acceptable for a given trade. One common technique for setting stop-loss targets is to use a percentage of the account balance, with a lower percentage corresponding to a wider stop-loss target and a higher percentage corresponding to a tighter stop-loss target. It is important to carefully consider the potential risks and rewards of a trade before setting a stop-loss target and to regularly review and adjust the stop-loss as needed.

Setting stop-loss targets is crucial for risk management in trading. The best approach depends on strategy, risk tolerance, and market conditions.

Percentage-Based Stop-Loss: A common method is setting a fixed percentage (e.g., 2-5%) below the entry price. This ensures consistency but may not account for volatility.

Support/Resistance Levels: Placing stops just below key support (for longs) or above resistance (for shorts) avoids premature exits due to normal price fluctuations.

Volatility-Based Stops: Using indicators like Average True Range (ATR) adjusts stops based on market volatility, preventing tight stops in choppy markets.

Time-Based Exits: If a trade doesn’t move as expected within a set period, exiting avoids dead capital.

Always backtest and adjust stops to align with your trading plan.