5 Types of Stop Losses: When to Use Each One

5 Types of Stop Losses and When to Use Each One

Not all stops are created equal. Most traders use one type — the hard stop — and ignore the other four. That’s like owning a toolbox with only a hammer.

Our Risk Management Playbook defines five stop types, each designed for different market conditions and trade setups.

1. Hard Stop

A fixed price level entered at trade entry. Non-negotiable. The platform executes it regardless of your emotions. This is your default — every trade should have one.

When to use: Always. Every single trade. No exceptions.

2. Structural Stop

Placed based on market structure — below support, above resistance, beyond a key level. The logic: if price reaches this level, your thesis is invalidated.

When to use: Mean reversion trades where specific levels define the trade thesis.

3. Trailing Stop

Moves with price as the trade goes in your favor. Locks in profits while giving the trade room to run. We use 3x ATR trails in our breakout strategies.

When to use: Momentum/breakout trades where you want to capture the full move.

4. Breakeven Stop

Move your stop to entry price after the trade moves a defined amount in your favor. Eliminates risk while keeping upside potential.

When to use: After price moves 1R in your favor. Protects capital psychologically and mathematically.

5. Time Stop

Exit the trade after a set amount of time regardless of price. If your thesis hasn’t played out in 30 minutes (or whatever your timeframe), the opportunity cost of staying is too high.

When to use: Day trades where speed of move matters. If the setup is right, it should work within a defined window.

Combining Stops

Professional traders use multiple stop types simultaneously. A typical HTA trade might use a hard stop at entry, move to breakeven at 1R, then trail at 3x ATR from there. Three stop types, one trade, maximum protection.

Free Resource: Get the Snapback Strategy Playbook — The exact entry, stop, and target framework our traders use daily.

Mahalo for reading and trade well! — Glenn & Reid | Hawai’i Trading Academy