The Pathway
The Trader’s Blueprint: Reading Charts, Market Structure, and Analysis

Stop Losses & Take Profits (How to Lock in Profits & Cut Losses

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📍 What is a Stop Loss?

  • A stop loss is your emergency exit—it automatically closes your trade when price reaches a level where your idea is proven wrong.

  • It protects your capital by preventing massive losses.

  • Example: If you buy EUR/USD at 1.1000 and set a stop loss at 1.0980, your trade automatically closes if the price drops 20 pips against you.

📍 Why You MUST Use a Stop Loss
🚨 Stops you from blowing your account in one bad trade.
🚨 Prevents emotions from taking over—no revenge trading or holding losing positions.
🚨 Lets you stay in the game long enough to actually become profitable.

📍 How to Set a Stop Loss

  • NEVER use random stop losses (e.g., “I’ll just put it 10 pips away”).

  • Place it at logical levels:

    • Below/above structure (previous highs/lows).

    • Beyond order blocks or fair value gaps (where smart money trades).

    • At invalidation points (if price reaches this level, your trade idea is wrong).

📍 What is a Take Profit?

  • A take profit (TP) is your money lock-in point—it closes your trade at a set price so you actually secure profits.

  • Example: If you buy GBP/USD at 1.2500 and set a TP at 1.2550, your trade will close automatically once price hits that level, locking in 50 pips of profit.

📍 Why You MUST Use a Take Profit
✅ Ensures you actually secure profits instead of getting greedy.
✅ Stops you from turning winners into losers because you didn’t exit.
✅ Helps you trade with discipline and a clear plan.

📍 How to Set a Take Profit Properly

  • Aim for a realistic target based on market structure, not a random number.

  • Look for liquidity zones where price is likely to react.

  • Use a Risk-to-Reward Ratio (R:R) – at least 1:2 or 1:3 (risking 10 pips should aim for 20-30 pips profit).

📍 Final Thoughts on Stop Losses & Take Profits

  • Stop Loss = Seatbelt 🚗 – Keeps you from crashing and losing it all.

  • Take Profit = Paycheck 💰 – If you don’t lock in profits, the market will take them back.

  • Always have an exit plan BEFORE entering a trade – If you don’t know where you’ll get out, don’t get in.

🔑 Key Takeaway:
Trading without stop losses and take profits is like gambling without knowing when to cash out. If you don’t have a plan, you’re just another donation to the market. Set your stops, lock in your profits, and trade with discipline.