Glossary
Stop-loss
An order that closes a position at a set price to limit the loss. The distance from entry to the stop-loss defines 1 R.
A stop-loss is an order that closes a position once price reaches a chosen level. It caps the planned loss and defines the trade's risk: the distance from entry to the stop is 1 R. It is not a guaranteed price. Once triggered, it fills at the next available price, so a gap or a fast market can make the loss larger.
Example
You sell gold at 4,000.0 with a stop-loss at 4,008.0. The risk is 8.0 USD per ounce. With an account of 5,000 USD and 1% risk per trade (50 USD), the position size is 50 ÷ 8.0 = 6.25 ounces. If the stop fills at its level, the loss is 50 USD, which is −1 R.
Why it matters
Without a stop-loss, R cannot be measured and a single trade can do lasting damage. Placing the stop where the trade idea is proven wrong, and sizing from that distance, keeps the money at risk constant while the stop distance varies.