Wednesday, October 18, 2017

Trading Forex Without Stop Loss

May 28, 2012 by  
Filed under Forex FAQ & Latest Post

We have a question regarding stop loss from one of our fellow traders.

Below is the question:

When I am placing Stop Loss during the trading, I
am losing money. But instead of Stop Loss when I amĀ  placing only Take Profit Limit and I am gaining money. Am I right in the position or I am going in a wrong way?

Please give advice to me.

From the question above, it looks like you are saying that you are making money when you are trading without a stop loss. However when you place a stop loss for your trade, it almost always get stopped out.

First of all, let me tell you why you are always making money when you are trading without stop loss. This is because price rarely moves in a straight line. It always moves in waves and therefore when you are not placing your stop loss, you manages to make money from the retracement of the price.

There are 2 possibility for your problem. One is your stop loss could be too small which leads to it always being triggered. Two is your target profit is also very small which means that you manage to make small profit every time.

However I must tell you that you are playing with fire. Without a stop loss, you risk the chance of a sudden spike in price which could be due to news release that trigger your margin call.

Once you have a margin call triggered, your broker will exit your position for you without having to notify you and you will make a very big loss.

Even without a sudden spike in news release, you also have the risk of price making sharp movement due to the trend and land you in a position where you are making a massive loss but did not triggered your margin call.

However you are going to make a decision on whether you are going to exit your position accepting such a big loss or you are holding to the position hoping for the price to reverse. If you are choosing the latter, you are also running the risk of triggering your margin call as the price may continue to move down due to strong trend.

My personal advice for you is to adjust your stop loss to a level which is acceptable and do not get triggered every time. You can do that by doing a back tracking on your chart. You can record down trades that you may take and what is the maximum loss for those trades.

From the records, you will be able to choose a stop loss that is reasonable and do not get triggered very often. The number one priority for any professional trader is to protect their trading capital.

As long as you have your trading capital, you can trade another day. Therefore any trader should always trade with stop loss as it will prevent your capital from being wiped out.


2 Responses to “Trading Forex Without Stop Loss”
  1. DUNCAN WATSON says:

    I have great problems having to type in figures for SL/TP I have recently tried a program called One/Click which is great when working but not always stable. Is there any other means available.
    regards Duncan

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