Traders can attempt to ‘cap,’ or mitigate losses with the usage of stop-loss order. A Stop-Loss is a protective order added to a trade; a order that will close the position if price moves against the trader.
There are not as many indicators designed for risk management, or stop placement as there are for other facets of trading, such as entering trades – but there is one indicator that traders can look to for suggested risk management that is known as Parabolic SAR.
Parabolic SAR (which stands for STOP and REVERSE) is an indicator designed by J. Welles Wilder with the goal of denoting market trends.
Below is a chart with Parablic SAR applied (using the default inputs of .02 step and .2 limit). Please notice the area encompassed by the box outlined in blue.