STOP LOSS AND TARGET IN INTRADAY TRADING - RISK MANAGEMENT GUIDE

 

STOPLOSS AND TARGET IN INTRADAY TRADIN





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Learn how to set stop loss and target in intraday trading. Understand risk management, risk-reward ratio, and how to protect capital while trading.


Introduction

Most beginners focus only on:

 “Which stock to buy?”

But successful traders focus on:

 How much can I lose?

This is where Stop Loss and Target Setting come into play.

If you don’t control your losses, no strategy will save you.

This guide will help you understand:

  • what is stop loss

  • how to set targets

  • how to manage risk in intraday trading


What is Stop Loss?

A stop loss is a predefined price level where you exit a trade to limit your loss.

Example

You buy a stock at ₹100.

You set stop loss at ₹97.

If price falls to ₹97 → trade automatically exits.

 Loss limited to ₹3 per share.

Why Stop Loss is Important

Stop loss protects you from:

big losses
 emotional trading
 market uncertainty

Rule:

 Small losses are part of trading. Big losses destroy capital.

Types of Stop Loss

1️⃣ Fixed Stop Loss

Set a fixed price level.

Example:

Buy at ₹100
Stop loss = ₹95

Simple but not always accurate.

2️⃣ Technical Stop Loss

Based on chart levels.

Examples:

  • below support

  • below trendline

  • below previous low

This is more effective.

3️⃣ Trailing Stop Loss

Stop loss moves with price.

Example:

Buy at ₹100
Price moves to ₹110
Trailing SL moves to ₹105

Locks in profits.

What is Target in Trading?

A target is the price level where you plan to book profit.

Example

Buy at ₹100
Target = ₹110

Profit = ₹10 per share.

Why Target Setting is Important

Without a target:

 traders become greedy
 profits turn into losses

Target helps you:

 lock profits
 follow discipline
 avoid emotional decisions

Risk-Reward Ratio (Most Important Concept)

This is the key to successful trading.

Formula

Risk-Reward Ratio = Risk / Reward

Example

Buy at ₹100
Stop loss = ₹95 → Risk = ₹5
Target = ₹110 → Reward = ₹10

Risk-Reward = 1:2

Ideal Risk-Reward Ratio

 Minimum 1:2

This means:

For every ₹1 risk → aim ₹2 profit

Why Risk-Reward Matters

Even if you are wrong multiple times, you can still make profit.

Example:

3 losses = ₹300
2 profits = ₹400

Still profitable.

How to Set Stop Loss in Intraday Trading

Method 1: Based on Support

Buy near support
Place stop loss below support

Method 2: Based on Candle Low

Place stop loss below:

  • previous candle low

  • breakout candle low

Method 3: Based on Moving Average

If using 20 EMA:

Place stop loss below EMA.

How to Set Target in Intraday Trading

Method 1: Previous Resistance

Target near:

  • resistance level

  • previous high

Method 2: Risk-Reward Method

If risk = ₹5
Target = ₹10 (1:2 ratio)

Method 3: Trailing Target

Let profits run using trailing stop loss.

Example Trade Setup

Entry = ₹100
Stop loss = ₹97
Target = ₹106

Risk = ₹3
Reward = ₹6

Risk-reward = 1:2

Golden Rules for Stop Loss & Target

 Always define stop loss before entry
 Never increase stop loss after entry
 Follow minimum 1:2 risk-reward
 Do not exit early out of fear
 Do not hold losing trades


Common Beginner Mistakes

 Trading without stop loss
 Moving stop loss further
 Taking small profits and big losses
 Overconfidence after profit
 Ignoring risk-reward

These mistakes destroy trading accounts.

BEST INTRADAY STRATEGIES FOR BEGINNERS

Psychological Aspect of Stop Loss

Stop loss is not just technical — it’s psychological.

Many traders:

  • avoid stop loss

  • hope price will reverse

  • hold losing trades

 This leads to big losses.

Professional traders accept small losses.

Why Most Traders Fail

Because they:

 ignore risk management
 focus only on profit
 don’t follow discipline

Success in trading = Risk control + consistency.

Key Takeaways

 Stop loss protects capital
 Target locks profits
 Risk-reward ratio is critical
 Minimum 1:2 ratio recommended
 Discipline is more important than strategy

Final Thoughts

Intraday trading is not about winning every trade.

It is about:

 managing losses and maximizing gains

If you master stop loss and target setting, you are already ahead of most traders.



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