Stop Loss Strategies — Protecting Your Capital in the Egyptian Market

A stop loss is a predetermined price level where you exit a losing position to prevent further damage. It is the single most important risk management tool. Without a stop loss, a small loss can grow into a devastating one — turning a recoverable situation into a permanent capital destruction.

Method 1 — Fixed Percentage Stop: Set a stop loss at a fixed percentage below your purchase price (commonly 7-10%). Simple and easy to implement. Downside: it ignores the stock's actual volatility and support levels. A volatile stock might trigger the stop on normal movement.

Method 2 — Support-Based Stop: Place your stop loss just below a key support level. This is more intelligent because it uses the stock's actual price structure. If support at 45 EGP has held three times, a break below 44.50 is a meaningful signal that something changed.

Method 3 — ATR-Based Stop: Use the Average True Range (ATR) multiplied by a factor (usually 1.5-2x) to set your stop. ATR measures the stock's normal daily range. This method adapts to each stock's volatility — volatile stocks get wider stops, stable stocks get tighter stops.

FoudaLens scenarios calculate stop loss levels for each investor profile using a combination of support levels, ATR, and risk-reward optimization. The speculator gets tighter stops, the long-term investor gets wider stops. Each scenario shows the calculated stop loss and the risk-reward ratio.

Golden rules for stop losses: (1) Set your stop BEFORE entering the trade. (2) Never move your stop loss further away — only move it up (trailing stop). (3) If your stop triggers, respect it. Re-enter the stock later if conditions improve, but never override the stop in the moment. This is not financial advice.