Investors must realize that perfect trades don’t exist. Once leverage is used, understanding the importance of a stop-loss becomes essential. Without a stop-loss, risks are infinitely magnified—especially in leveraged markets, where liquidation can happen easily. Many investors like to hold onto losing positions, and sometimes these do turn into profits. However, if a major market movement or a black swan event occurs, failing to set a stop-loss can wipe out an account instantly—an unforgettable and painful experience.

Investors must develop the ability to admit mistakes (cut losses) and the courage to stick with the right direction (let profits run).

Stop-loss should not be blind or random. Rules matter. A stop-loss strategy should work in harmony with other components of the trading system. It also helps define position sizing. For example, if you're managing risk using a fixed dollar amount per trade, position size = stop-loss amount / stop-loss distance.

There are many stop-loss strategies. Common ones include:

1. Support and resistance-based stop-loss
   Use support and resistance levels from the current or higher timeframes.

2. Post-spike high/low stop-loss
   Highs or lows after a surge or crash often represent intermediate tops or bottoms.

3. Close price vs. moving average stop-loss
   In moving average-based systems, use the relationship between the closing price and the moving average.

4. Trailing stop-loss
   Start with an initial stop-loss. Once the trade becomes profitable, adjust the stop-loss to follow gains, protecting both capital and floating profits.