What is a stop loss calculator?
A stop loss price calculator is a tool that helps traders and investors calculate their stop loss price based on a percentage risk.
This helps to manage risk better and it instantly shows the price at where a position should be sold or bought back to stay within a certain risk limit.
In simple terms, it works like a safety net for your positions by showing you where to add your stop loss.
The stop loss percentage calculator works for both long and short positions and it works with any market you trade such as forex, crypto, stocks, and commodities.
How the stop loss calculator works
Imagine that you have bought a stock or a cryptocurrency and you want to make sure that you don’t lose more than necessary if the price starts to fall.
Here is how it works:
- Setting Parameters: The first step is to input the parameters into the calculator:
- Entry Price: This is the price at which you initially bought or entered into a trade.
- Risk Percentage: This is the percentage of your investment capital that you’re willing to risk on this trade. It represents how much you’re willing to lose if the trade goes against you.
- Trade Type: You specify whether it’s a “long” or “short” trade. In a long trade, you’re betting that the asset’s price will go up, while in a short trade, you’re betting that the price will go down.
- Calculating the Stop Loss Price: The calculator then uses a formula to calculate the stop loss price based on the parameters you’ve provided.
In this case, the calculator helps you decide exactly where to automatically sell your asset.
Simply add your criteria for the trade and your stop loss price will be given.