IntermediateLesson 2 of 4 · 8 min
Stops and Invalidation
Place stops where the idea is wrong, not at a random distance.
Illustrative chart · Stop beyond structure
Logic before distance
A stop should mark the price at which your reason for the trade no longer holds. Placing it just beyond the structure that defines the idea makes that explicit.
If the logical stop is too far for your risk budget, the answer is a smaller position or no trade — not a tighter, arbitrary stop.
Key takeaways
- Stops mark where the idea is wrong.
- Too wide? Reduce size or skip.
- Never widen a stop mid-trade to avoid a loss.
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Charts are illustrative examples, not real market data. This content is for educational purposes only and is not financial advice.