Calculation: A Stop Loss Calculator is a tool used by traders to determine the ideal stop loss level for their investments. It helps protect against excessive losses by calculating the price at which an asset should be sold if its value falls below a certain threshold.
What Does a Stop Loss Calculator Do?
This calculator helps traders manage risk by setting a limit on the potential loss for a trade. By determining the stop loss level based on the percentage of risk a trader is willing to take, the calculator provides a simple, automated way to calculate stop loss levels to avoid significant losses.
Stop Loss Calculator Formula
To calculate stop loss, use the following formula:
Stop Loss Price = Entry Price - (Entry Price × Stop Loss Percentage)In this formula:
- Entry Price refers to the price at which the asset is bought.
- Stop Loss Percentage is the percentage loss the trader is willing to tolerate.
Stop Loss Calculator Example
Example 1:
Let’s say you bought a stock at $100, and you want to set a stop loss at 10%. To calculate the stop loss:
- Multiply the entry price ($100) by the stop loss percentage (10%):
100 × 0.10 = 10 - Subtract the result from the entry price:
100 – 10 = $90
So, your stop loss price is $90.
Example 2:
If you bought a stock at $250, and your stop loss is set to 5%, follow these steps:
- Multiply the entry price ($250) by the stop loss percentage (5%):
250 × 0.05 = 12.5 - Subtract the result from the entry price:
250 – 12.5 = $237.50
So, your stop loss price is $237.50.
The Stop Loss Calculator is an essential tool for managing risks in trading, ensuring that potential losses are limited and helping traders make more informed investment decisions.