What is a stop loss?
The stop loss is the tool that helps us set the maximum losses we are willing to take on a trade, in addition to being the level at which, if the price goes against us, staying in the trade no longer makes financial or statistical sense.
Why should stop loss orders be activated?
It is due to liquidity and structure.
Markets tend to move towards areas where liquidity is concentrated, and these areas are usually easy to identify.
They form below the lows of the range, above resistance,
and around recent highs and lows. At the same time, many traders behave similarly, entering on breakouts.
They place their stops just below the range.
Over time, this creates clusters of orders in very specific areas. These clusters become liquidity.
When the price moves towards those areas,
the stops are activated and liquidity is filled. Only after this process can the main movement develop. That’s why the first move is often misleading.
Understanding this changes the way to interpret the market; instead of reacting to the breakout, it is more effective to observe how the price behaves around liquidity. Stop loss orders are not the problem.
Their location, in relation to the structure, is what matters.
#stoploss #LiquidationAlert $BTC