What Is a Stop Loss? | What Are Forex Signals?

A stop loss is an order that closes your position automatically if the price moves a set distance against you. In a forex signal, the “SL” level is the provider’s suggested exit if the trade idea turns out to be wrong.

How it works

For a buy (long) position, the stop sits below the entry price; for a sell (short) position, above it. When the market reaches the stop level, the order becomes a market order and closes the trade at the next available price.

Signal	Entry	Stop loss	Distance
Buy EUR/USD	1.0850	1.0820	30 pips below
Sell GBP/USD	1.2650	1.2690	40 pips above

A long position’s stop is triggered by the bid price and a short position’s by the ask, so the spread widening can trigger a stop even if the mid-price never touches it.

Stops and position size work together

A stop sets the distance in pips. Your lot size turns that distance into money. The common approach is to choose the dollar amount you are willing to lose first and size the trade to fit the stop:

Account: $10,000. Risk: 1%, or $100.
Stop: 25 pips on EUR/USD.
Pip value needed: $100 ÷ 25 = $4, which is 0.40 standard lots.

If the same signal had a 50-pip stop, the same $100 risk would mean 0.20 lots. Wider stops call for smaller positions, not bigger losses.

Why a stop loss is not a promise

A stop makes sure you exit; it does not fix the price you exit at.

Gaps. If the market jumps past your level, for instance at the Sunday open or on a surprise announcement, the stop fills at the first price after the jump. The difference is slippage.
Fast markets. Around major data releases, prices can move several pips between quotes.
Extreme events. When the Swiss National Bank removed its euro floor in January 2015, many stops on franc pairs filled far beyond their levels, and some traders ended with negative balances.

Some brokers outside the US sell a premium type of stop that always fills at the set level, for an extra charge. Check whether yours offers one and what it costs.

What to watch for in signals

Signals without a stop. A trade idea with no stated exit leaves the risk undefined.
Moved stops. Providers who widen stops after entry, or tell followers to “hold”, are changing the risk after the fact.
Very wide stops with small targets. These produce high win rates and occasional large losses. See why win rate is misleading.

More on how stops fit into overall risk is in forex signal risks explained.