8.2. Support and Your Stop-loss
One way to place a stop-loss is at a price the stock has itself respected in the past. The Decision Room is built to help you find such a price.
Support
When a stock rises over weeks or months, it rarely rises in a straight line. It climbs, falls back, and climbs again. Often the falls end at much the same kind of level each time, as if the price had found a floor. That floor is called support.
One common way to see support is through a moving average: the average of the last so many closing prices, recalculated each period, which draws a smooth line under the candles. The exponential moving average, or EMA, gives the most recent prices more weight. In many rising stocks, the pull-backs keep ending near one particular moving average. One stock keeps finding its floor near its 21-week average; another, slower one, near its 40-week average. Which one, and how reliably, differs from stock to stock and changes over time.
Knowing which average a stock has been holding gives a stop-loss something to stand on. A stop placed a little under that level sits just below where the price has repeatedly turned. If the price breaks clearly below it, the stock is behaving differently from the way it has been, and that is often the moment an investor wants to know about.
Whether and how to use this is a matter for your own method. The Decision Room's tools help you see it for a particular stock.
Seeing It on the Chart
Open a position from the queue. The chart shows its candles with three EMAs drawn over them, of 9, 21 and 40 periods, and your entry marked. Start on Weekly, which smooths out the day-to-day noise; Daily and Monthly are a click away.
Look at the pull-backs since you bought, and before. Do the candles keep turning up near one of the three lines?
If none of the three fits, use Probe EMA. Choose Show, and drag its slider anywhere from 5 to 200 periods. The other averages fade, and a single line of the length you choose is drawn. Move it until the line runs along the floor of the pull-backs. The table beside the chart lists each average's value, and how far the current price (%CMP) and your entry (%Entry) sit above it, or below it when negative, so you can read off the level exactly.
You can try this here. Figure 8-2 is a working copy of the probe, on the weekly chart of VENUSREM, one of the positions in our example's queue, from July 2025. Drag the slider, and watch where the line runs against the stock's pull-backs as it rose. Clear hides the probe and brings back the 9, 21 and 40-week lines.
VENUSREM, weekly
Entry ₹317.7 on 2025-02-14 · CMP ₹1,650.7
| EMA · Weekly | Value | %CMP | %Entry |
|---|---|---|---|
| 9 | 1,658.74 | −0.48% | −80.85% |
| 21 | 1,561.86 | +5.69% | −79.66% |
| 40 | 1,350.74 | +22.21% | −76.48% |
| 50 (probe) | 1,256.45 | +31.38% | −74.71% |
Choosing the Price
With a level in mind, put a price in the box under Set stop loss. You can type it, drag the SL slider, which runs from your entry down to 30% below it, or use a button after Quick-set 0.5% below:, which fills in a price 0.5% under one of the averages, such as W21 for the 21-week line. The stop appears as a line on the chart.
As soon as there is a price in the box, Tradestory works out what it would mean for this position:
- how far it is below your entry and below the current price,
- ₹ at risk: what you would lose from your entry if the position were sold at that price,
- % of capital: that loss as a share of your capital,
- vs Strategy SL: SL LAG when your price is more than 0.5% below the stop your strategy works out, and OK otherwise,
- and SL vs EMAs: how far your price sits from each average.
These turn a price on a chart into what it costs you. A stop under a support level that is far below the current price may put more of your capital at risk than you intended; a closer one may sit inside the stock's ordinary swings. Seeing both in front of you is the point of the room.
When you are settled, choose Save SL. The stop becomes the position's My SL, the same one you can see and edit on the Dashboard. Clear SL removes it, and the position goes back to your strategy's stop alone.
Next, a tool for preparing a decision about any stock: looking up a symbol.