Deciding your loss in advance
A stop-loss is a promise to yourself
You set it when you open the trade: 'if this falls 10%, I'm out.' It closes automatically. The point isn't the 10% — it's that you decided while calm.
Because you won't decide well later
When a position is deep red, your brain will find reasons to hold. It'll call it a dip. A stop-loss removes you from that conversation.
Take-profit is the same idea inverted
Greed is as expensive as fear. A take-profit closes you out at a gain you'd be happy with, before you talk yourself into waiting for more.
Try it
Open a trade in Bitcoin Hero and set a stop-loss at -10% and a take-profit at +25%. Then leave it alone. That's the discipline this teaches.
Check yourself
What is the real purpose of a stop-loss?
- To guarantee you never lose money
- To make the decision while you're still thinking clearly
- To predict where the price will bottom
Show the answer
To make the decision while you're still thinking clearly — It can't stop losses happening. It stops you renegotiating with yourself once one is underway.