Time-based stop loss

A time-based stop loss is a stop loss that is initiated after a pre-determined amount of time has elapsed. It can be automated or manual and in both cases, your position is closed to allow you to seek a better market or opportunities for your trading capital.

Time-based stop losses are also sometimes referred to as "time stops".

How are time-based stop losses used?

Remember: It is important to note that money management rules still apply with time-based stop losses and they should always be used in conjunction with a pre-determined stop loss and profit target.

Time-based stop losses are often used if the market does not seem to be moving in either direction, meaning that neither your stop loss nor profit target has been hit for a certain period of time.

Rather than leaving your money tied up in a trade where there isn't much movement, you can use a time-based stop loss to exit after a certain amount of time has elapsed, leaving you free to use that capital for other opportunities.

Also, if you prefer not to leave your trades open overnight or over the weekend, you could set a time-based stop loss to close your positions and avoid the risks associated with market gaps.

To learn more about the different types of stop losses, read our lesson:

Placing stop loss orders effectively can be the difference between a winning strategy and a losing one. Learn about the different types of stop losses and where they go.
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