Stop-loss management system development

Development of Stop-Loss Management System

Stop-loss management is not just placing an order. It's a decision-making system for placement, relocation, and execution of protective orders throughout the entire position lifecycle.

Initial Stop Placement Strategies

ATR-based: stop at N × ATR below entry. N = 1.5–2.5 depending on strategy. Adapts to volatility.

Structure-based: stop behind nearest structural level (swing low/high, support/resistance). Logically justified: if structural level is broken, the trade idea is invalid.

Volatility-based (Chandelier): stop at N × ATR below position maximum. Automatically trailing.

Percentage-based: simple fixed % from entry. Less adaptive, but simple.

Stop Relocation

Break-even: after reaching TP1 or N% profit, move stop to entry point. "Free ride" position.

class StopLossManager:
    def __init__(self, entry_price, initial_stop, side='long'):
        self.entry_price = entry_price
        self.stop_price = initial_stop
        self.side = side
        self.state = 'initial'  # initial, break_even, trailing
    
    def check_breakeven_trigger(self, current_price, breakeven_trigger_pct=0.015):
        if self.side == 'long' and self.state == 'initial':
            profit_pct = (current_price - self.entry_price) / self.entry_price
            if profit_pct >= breakeven_trigger_pct:
                self.stop_price = self.entry_price
                self.state = 'break_even'
                return True
        return False
    
    def update_trailing_stop(self, current_price, highest_price, trail_pct=0.02):
        if self.state in ('break_even', 'trailing'):
            new_stop = highest_price * (1 - trail_pct)
            if new_stop > self.stop_price:
                self.stop_price = new_stop
                self.state = 'trailing'

Hard vs Soft Stop

Hard stop: limit or market order on exchange. Executes automatically without bot participation. More reliable, but may slip on fast move.

Soft stop: price monitoring in code, send order on level reach. More flexible (can apply logic), but depends on bot operability.

Recommendation: both simultaneously. Soft stop cancels Hard stop on normal operation. Hard stop is insurance against bot failure.

Gap Execution

On gap opening (price jumped through stop level):

• Limit stop may not execute
• Market executes at worst available price
• Stop-limit (specific order type): trigger by stop, execute by limit

Stop-limit setup: trigger = $44,000, limit = $43,500. Executes if price on gap doesn't go below $43,500. Otherwise remains as limit order on open position.

Stop Monitoring

Dashboard visualizing all open positions, their stops and distance to stop in %:

Alert when price approaches stop at 50% of initial distance.

We develop stop management system with automatic break-even relocation, trailing stop, hard/soft stop support and monitoring all positions.