Generally, where do you add a stop loss? When I think about this, one of two choices come to mind:


1. Add a stop loss at a key price level, based on TA. Let's say I enter XYZ on the 200 day SMA bounce. I would add a stop loss a few cents (.05-.10) below the SMA. By the way, is there a rule to determine how many cents below the SMA I should add the stop loss?

2. Add a stop loss based on a fixed percentage. For example I enter XYZ at $100 and I set my stop loss at 2% of my entry price, which would be a $98 stop.


Personally, I think adding a stop loss based on TA at a key price level is much "smarter" than adding a stop loss based on an arbitrary percentage. For example, let's say I were to enter XYZ at $100 and assume it's consolidating between $95 and $105. If I were to add a 2% stop loss, I would be stopped out at $98 for a loss if XYZ were to plunge. However, let's say there was a 50 day SMA right below the $95 level, such as $94.90. If I were to add a stop loss at $94.80 and XYZ were to bounce off of the SMA, I wouldn't be stopped out and could wait for XYZ to touch $105 for a profit.

Which option is the better choice? Or is there something else that I'm missing entirely? Keep in mind that I only study TA as of now.