## How to Stop Loss on Investment Losses? Deep Understanding of the Core Value of Stop-Loss Points

In trading markets, many investors' greatest enemy is not the market itself, but their own mindset. When holdings start to incur losses, psychological struggles often lead investors to make the worst decision—holding on in hopes of a market reversal. At this point, setting a reasonable stop-loss point becomes especially critical.

### What exactly is a stop-loss point?

**A stop-loss point is a pre-set price level at which, when the asset's price reaches it, the system will automatically or manually execute a closing operation to limit the extent of losses.** It is the most basic and effective protective tool in an investment risk management system. The essence of a Stop Loss is to "stop losses," preventing losses from expanding indefinitely.

Compared to this, many investors fall into trouble precisely because they lack a clear stop-loss setup. For example, investing $10 million in $100 Apple stocks—if the stock price drops to $50 (a 50% decline), the position value plunges to $5 million. To break even, the stock needs to rise 200%, which is not only time-consuming but also tests psychological endurance. In reality, most investors lose patience after a loss of over 50%, ultimately ending in significant losses. Conversely, if a stop-loss is set at a 10% loss, the remaining $9 million only needs an 11% profit to break even, greatly reducing the difficulty of recovering the principal.

### Why is it necessary to set a stop-loss point?

**First, timely correction.** Investment decisions are sometimes based on incomplete information or incorrect judgments. A stop-loss point helps investors quickly recognize mistakes and cut losses.

**Second, responding to market sudden changes.** Market environments change rapidly. Even if the initial investment logic is sound, subsequent policy changes, black swan events (such as a global pandemic) can overturn original investment assumptions. Setting a stop-loss point allows timely exit during abnormal volatility, avoiding systemic risks.

**Third, improving capital utilization efficiency.** Not setting a stop-loss means capital remains frozen in losing positions for a long time, unable to be invested in other opportunities. Timely stop-loss frees up funds to seek new profit opportunities.

**Fourth, protecting mental state.** Continuous losses erode investor confidence, leading to more reckless decisions later. Controlling the size of individual losses can maintain a stable trading mindset.

### How to use technical indicators to determine the position of the stop-loss point?

Investors can use various technical tools to scientifically set stop-loss points instead of relying solely on percentages or amounts:

**Support and Resistance Levels**
In a downtrend, if the stock price tests a certain level repeatedly but fails to break through, this level is called resistance. The stop-loss can be set above resistance. Once the price breaks below support, it often signals further decline risk. Setting a stop-loss here can effectively prevent losses from chain reactions of falling.

**MACD Indicator (Moving Average Convergence Divergence)**
When the short-term moving average crosses below the long-term moving average, forming a "death cross," it indicates a bearish signal. Investors can set stop-loss points below this level to exit promptly and avoid larger losses.

**RSI Indicator (Relative Strength Index)**
An RSI above 70 indicates overbought conditions; below 30 indicates oversold. Overbought often signals a pullback. Investors can set stop-loss points near the current price or consider stopping out when the price falls below RSI 30.

**Bollinger Bands (BOLL)**
When the price breaks downward from the area between the upper and middle bands, it signals a sell. If the price continues to operate below the middle band, the stop-loss should be adjusted lower to avoid being shaken out by oscillations.

### Three ways to implement stop-loss points

**Active Stop-Loss**
Investors manually execute closing based on market conditions. The advantage is high flexibility, but it requires constant market monitoring.

**Conditional Stop-Loss**
Pre-set a price level; when the asset reaches this price, the system automatically executes the trade. This method requires no manual monitoring and is suitable for investors who cannot watch the market continuously.

**Trailing Stop-Loss (Dynamic Stop-Loss)**
The stop-loss level automatically rises with the price but remains unchanged when the price falls. For example, setting a 2-point trailing stop means that as the stock price rises, the stop-loss line moves up by 2 points, maximizing floating profits while avoiding risks. This is a common risk management tool used by advanced investors.

### Practical Recommendations

The core logic of setting a stop-loss should be based on individual risk tolerance, investment horizon, and capital size. Short-term traders may use technical indicator methods, while medium- and long-term investors can combine fundamental changes to set stop-loss points. Regardless of the method, the most important thing is **discipline in execution**—once the stop-loss point is reached, it must be firmly closed out, without wavering due to short-term market fluctuations.

A stop-loss point is not an admission of failure but a rational risk management tool. Every effective stop-loss preserves firepower for the next opportunity to succeed.