Traders operating in the financial markets with a short-term and medium-term perspective usually use profit and loss limits to determine when to exit their trades   . These people, who are mostly engaged  in trading in financial markets such as  stocks , currencies, etc., based on  technical analysis , often set limits on their profit and loss. In this case, the exit from the transaction is done with the aim of reducing losses and increasing profits. Let us give an example in this regard. Suppose a person buys a stock at a price of 200 tomans. Based on the results of the analysis he has done on these stocks –  which are usually technical analysis –  he decides when the price reaches the first expected price ceiling,  for example 220 Tomans. Sell ​​your stock. If the stock price drops to 180 tomans, he will also sell his shares. In this case,   his loss limit will be 180 Tomans.

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What factors are influential in determining the loss limit?

Various factors affect the  extent of the loss . For example, we can refer to the characteristics of the investor in terms of risk-taking and his time perspective in investing. But in general, the factors influencing this process include the following:

•  Important support trend line or share price floor
• Fibonacci
• Elliott Waves
• Graphical patterns
• Two floor
•  Soroshaneh pattern
• ‌Location‌location of loss limit

. Changing the position of  the loss limit  to a higher or lower point means determining the floating limit or variable. For example, when we buy a share at a price of 250 tomans, we  set the loss limit  for it at 230 tomans. If the share price increases and reaches the point of 330 Tomans, we  set the loss limit  at a higher point, for example, at the price of 300 Tomans. This process is called  limit change  according to the stock price trend.

Basic principles in determining the limit of loss that you should always remember

There is no general rule for  determining the extent of a loss  . But to determine this limit, there are significant points to consider. For example, the following can be mentioned: ‌

1.  Loss limit or stop loss means that when the stock price falls to a specified level, we must sell it to avoid further losses.
2. Decreasing profits is also a kind of loss, so when the stock price rises, the loss limit should be increased in proportion to the price. 
3. One of the most common mistakes is to change the loss limit for no technical or logical reason. In this way, as the price approaches the loss level, the trader changes or eliminates it and waits for the loss to decrease or disappear. Although in some cases this move may compensate or reduce losses, in the long run it will only result in the destruction of the investment plan and strategy.
4. The loss limit should not be more than 10% of the purchase amount and this means that you should not lose more than 10% of your purchase amount.
5. You should not set the limit too far or too short from the purchase price.
6. If the market trend and index is bullish, after defining the profit limit without selling the share, we only define the limit. However, if the market trend is declining and the index is improving, we should either withdraw completely from the stock after reaching the profit limit, or sell a part of the stock with a profit and for the rest, the trailing stop at Consider.
7. The time perspective of an investor is very important in determining the loss limit. For example, setting a limit for short-term trades is different from setting a limit for long-term trades. 
8. In short-term trading, place the breakout at the support level of the previous bearish wave. (Provided it is between 8 and 10 percent.) ‌
9. In medium- and long-term purchases, set a loss limit on a valid support range. (Between 10 and 20% lower than the purchase price) ‌‌
10. When the resistance of a stock breaks and the stock price stabilizes above the resistance range, set the limit on the broken resistance which now acts  as a support.

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