A stop loss level should be planned when you enter a trade. This is the price level that if it is reached that you will know that your entry was wrong.
You should position size with a share count and dollar amount where if your stop is hit you will not lose more than 1% of your total trading capital.
If you have a profit target then that is where you will stop the trade with an exit to take profits.
A trailing stop is where you raise your stop behind a winning trade and take profits at the first reversal back to your trailing stop.
Many stops are placed a certain percentage under key support levels or above resistance levels because if broken by too much the trade may be wrong.
It is important to not set actual stop loss orders at the most obvious levels, these will almost always be triggered on the first volatility and then reverse back. Give your trade some room to breath and a chance to be right in your time frame.
End of day stops are what a lot of longer term traders use and base their stop losses on either the same day close and trade the last 30 minutes or so or they execute their stops the next morning based on the previous days close. This frees up a lot of time not spent trying to trade the intra-day price noise and focus instead on how the market closes.
If you use option trades in small of enough position sizes they could have a built in stop if the total contract size is less than 1% of your trading capital. You are not exposed to more than 1% of risk but keep the upside if your trade goes in your favor. Your total potential loss is capped at your total contract size but still be leveraged in the direction of your trade.
Tight stops will enable you to keep all losses small but usually drive up your losing percentage if too tight. Wide stops gives your trade the time and more opportunity to work out and usually increases your winning percentage but leads to larger losses when wrong.
Stops are tools to keep losses small and preserve emotional capital and a traders nerves. Big losses are what break the vast majority of both new traders and professional traders. Stops enable the trader to control the one thing that they can in the markets: the size of their losses when the trade goes against them.