Invalidation
The price that proves you wrong
What it is
The level at which the reason you entered no longer holds. Not an amount you are willing to lose, but a point on the chart where the idea is disproven.
What it may suggest
Defining it before entering is what makes position sizing possible at all.
Where it fails
Moving it once you are in is the single most expensive habit in trading. If the invalidation is too far away to size sensibly, the trade is too big, not the stop too wide.
Also called stop loss, invalidation level, stop.
More concepts
- Risk-to-rewardDistance to target versus distance to stop
- Position sizingHow much, given where the stop is
- Liquidity sweepA push through an obvious level, then straight back
- ConfluenceSeveral independent reasons pointing the same way
- Timeframe alignmentChecking the bigger chart agrees
- No tradeThe setup is not there
ChartPeak is an educational tool. It is not financial advice and does not make investment recommendations. Trading carries a risk of loss, and past performance does not indicate future results. Do your own research.
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