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Stop loss: where to place it and how to size the trade (with measured gold stop distances)

By Saad El Soussi, UAE-authorized finfluencer · Updated 2026-11-08

A stop loss is an order that closes a trade at a price you choose in advance, so the most you can lose on it is limited. Place it where your trade idea is proven wrong (beyond a swing high or low, not at a round number), then work backwards: position size = amount you risk ÷ stop distance. The SesTrading course says never to open a trade without one. On 2.4 years of gold, a $10 stop was hit within four hours in 51% of random entries, a $20 stop in 29%, a $40 stop in 9%.

What a stop loss is

You enter a trade and, at the same moment, tell the platform: if the price reaches this level against me, close the position. A buy has its stop below the entry price, a sell has it above. The course puts it in one sentence: by setting a stop loss you define the maximum loss you are willing to accept on a single trade. Its advice on the alternative is just as short: "do not open a trade without stop loss", because without one you can lose all or a large part of your money on a single position.

The stop is part of the plan you write before the trade: entry, stop and profit target are all set before you enter, and then you leave the trade alone. Moving a stop further away because the price is close to it is the mistake the lesson on common trading mistakes warns about: a position left open "to see what happens" is how one trade empties an account.

Where to place it

The stop belongs at the price where your reason for the trade no longer holds, not at the amount you would like to lose. Common places, from the pages of this course:

Beyond the last swing. For a buy, below the most recent swing low; for a sell, above the swing high. See market structure: if that low breaks, the higher-low sequence is over.
Beyond the level. If you buy a retest of support, put the stop on the far side of the zone, not exactly on the line where everyone else puts theirs.
Beyond the pattern. For a double top or bottom, beyond the two peaks or troughs; for head and shoulders, beyond the right shoulder (the rules of our gold backtest).
Sized to the volatility. Look at how far the instrument normally moves in the timeframe you trade. On gold, the median 4-hour candle was $25.7 from high to low and the median hourly candle $12.2 (13 June 2024 to 3 November 2026). A stop of $5 or $10 sits inside the normal noise of a single candle.
Not at a number you chose for comfort. "I can afford to lose $50" decides your size, not your stop.

From stop to position size

The course says to risk half a percent to one percent of your trading capital on each trade. The stop distance then sets the size:

Amount at risk = account × risk percentage.
Stop distance = |entry - stop| in price.
Position size = amount at risk ÷ (stop distance × value of one price unit per lot).

Worked example, gold. Account $5,000, risk 1% = $50. Entry $4,000.00, stop $3,980.00, so the stop distance is $20. One lot of gold is 100 ounces, so a $20 move is $20 × 100 = $2,000 per lot. Size = 50 ÷ 2,000 = 0.025 lot. Most platforms step in 0.01, so round down to 0.02 lot: the loss at the stop is 0.02 × 100 × 20 = $40, which is 0.8% of the account. (The $4,000 is only a round number for the arithmetic, not a price view.)

The same account with a stop of $40 and the same $50 risk gives 50 ÷ 4,000 = 0.0125, so 0.01 lot and a loss at the stop of $40. A wider stop means a smaller position, not a bigger loss. Try your own numbers in the lot size calculator.

Check the smallest size too: at 0.01 lot (1 ounce) a $185 stop loses $185, which on a $5,000 account is 3.7%, over the 1% rule. When the stop needed is wider than your smallest lot allows, the honest options are a smaller stop (only if the setup allows it), a different instrument, or no trade.

What we measured: how often gold hit stops of different sizes

We took COMEX gold futures (GC=F) hourly bars from Yahoo Finance, from 13 June 2024 to 3 November 2026 (13,746 hourly bars; a contract-roll error in the raw series was corrected first, see the backtesting page), and placed a simulated trade at the open of every 4-hour candle, one buy and one sell each time: 7,106 trades. Each had a stop of a fixed number of dollars and a target of twice that distance (1:2, see risk-reward ratio). A trade ended at the stop, at the target, or after 120 hours (five days) at the market price. If the stop and the target were both touched in the same hour, we counted the stop.

Stop distance	Hit within 4 hours	Stop hit before target (5 days)	Target (2R) hit first	Still open after 5 days	Average result per trade, no costs
$5	71.8%	70.2%	29.8%	0.0%	-0.107R
$10	51.0%	65.6%	34.4%	0.0%	+0.031R
$15	37.3%	65.4%	34.6%	0.0%	+0.039R
$20	28.6%	65.6%	33.7%	0.7%	+0.022R
$30	16.4%	64.0%	30.5%	5.4%	-0.002R
$40	9.4%	60.5%	26.7%	12.8%	-0.017R
$60	3.4%	50.6%	19.9%	29.6%	-0.003R
$80	1.4%	40.8%	14.9%	44.3%	+0.024R
$100	0.8%	32.5%	10.5%	57.0%	+0.026R

How to read it:

Tight stops are noise-bait. A $10 stop (less than one typical hourly candle) was touched within four hours half the time; a $5 stop seven times in ten. Nothing about the market was "against" the trade; it simply moves that much.
Wide stops are hit less often but ask for a smaller size, and the trade takes longer. With a $100 stop, 57% of trades were still open after five days.
The average result is about zero at every distance. The entries were random (a buy and a sell at the same moment, so no market direction is assumed), so no stop distance can create an edge by itself; the 1:2 break-even win rate is 33.3% and the table sits right around it (target first 34.4% at $10, 33.7% at $20). The stop protects the account; the entry and the plan have to make the money.
Costs hit tight stops hardest. Assume a round-trip cost (spread plus commission) of $0.50 per ounce, as on our backtesting page; check your own broker’s. On a $5 stop that is 0.50 ÷ 5 = 0.10R per trade, which turns -0.107R into about -0.21R. On a $20 stop it is 0.025R, on $40 it is 0.0125R.

Limits of the test: the price of gold moved from about $2,300 to above $5,600 in this period, so a $10 stop meant a very different percentage at the start and the end; the 7,106 trades overlap in time and are not independent, so treat the percentages as a description, not a forecast; costs, slippage and swaps are not included; and it says nothing about how stops will behave from here. Run date: 4 November 2026.

Gaps, slippage and what a stop does not guarantee

A stop loss is normally a stop order: when the price touches it, it becomes a market order and fills at the next available price. In a fast market, around news, or across the weekend, that price can be worse than your stop. This is slippage.
Gold can open the week away from Friday’s close. A stop inside the gap fills at the opening price, so the loss can be larger than planned. Size the trade as if the stop could cost a little more than 1R.
Some brokers offer guaranteed stops, usually for a fee or a wider spread; ask yours, and read what the contract says.
The stop only exists while your platform and broker accept the order. Do not rely on a mental stop: the course says to place the order and leave it.

Stop loss mistakes

No stop at all. The course calls it a no-go: "you always have to have a stop loss".
Moving it away when the price approaches. If the idea was wrong, take the 1R loss.
A stop so tight that normal noise hits it, then re-entering and paying the spread again (see the table).
Sizing the stop to the money instead of sizing the position to the stop.
Risking more than 1% because "this one is a sure thing". It is the pattern behind revenge trading and overtrading in the course lesson.

Key points

Never open a trade without a stop loss; set entry, stop and target before you enter.
Put the stop where the idea is proven wrong, then size the position: amount at risk ÷ (stop distance × value per unit per lot).
Risk half a percent to one percent of capital per trade, as the course says; check the smallest lot still fits.
On gold, a $10 stop was hit within four hours in half of random entries and a $40 stop in 9%: stops inside normal noise lose trades the idea did not lose.
A stop limits the loss, it does not make a strategy profitable, and it can fill beyond its price in gaps.

Related: scalping gold (stops of $4 and $8 on 5-minute candles), risk-reward ratio, how to write a trading plan, lot size calculator, common trading mistakes, how to trade gold.

Want to see stops on real gold trades?

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Questions people ask

What is a stop loss?

An order that closes your trade automatically at a price you set in advance, limiting the loss on that trade. A buy has the stop below the entry, a sell above it.

Where should I place a stop loss?

Where your trade idea is proven wrong: beyond the last swing low or high, beyond the support or resistance zone, or beyond the pattern. Then size the position from that distance. Do not pick the distance from the amount you want to risk.

How do I calculate position size from a stop loss?

Position size = amount at risk ÷ (stop distance × value of one price unit per lot). Example on gold: $50 at risk, $20 stop, 100 ounces per lot: 50 ÷ 2,000 = 0.025 lot, rounded down to 0.02 lot.

How much should I risk per trade?

The SesTrading course says half a percent to one percent of your trading capital per trade. Check that your smallest lot size does not break that at the stop distance you need.

How big should a stop loss be on gold?

There is no single number. In our measurement a $10 stop was hit within four hours in 51% of random entries, $20 in 29% and $40 in 9%, while the median 4-hour candle was $25.7. A stop inside the normal range of your timeframe is hit by noise; size it to the setup and the timeframe.

Can a stop loss fail to protect me?

Yes. It is normally a stop order that becomes a market order, so in gaps or fast markets it can fill at a worse price. Trading is risky; most retail accounts lose money.

Should I use a trailing stop or move to break even?

The lessons this page is based on do not teach it; they fix entry, stop and target before the trade. If you test it, backtest the rule on past data first, as on the backtesting page.

Authorized in the UAESaad Nizar El Soussi, founder of SesTrading, is listed by the UAE Capital Market Authority as an authorized finfluencer (entry 193, added 24 September 2026). Check the official list.