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Stop losses. A necessary evil?

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Blanco

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Hi all,

We are all told that trading without a stop loss is like driving without a seatbelt .... But is that true? Do you keep a journal of your trades and if so how many times have you correctly predicted the movement of an instrument but lost out because your stop was hit before the price moved in the direction you initially thought?

I'm not suggesting that you abandon common sense and forego good money management, I'm merely asking if it should be the 'go to' tool that we use it as.

I suggested somewhere else that there were other options but my views were attacked as heresy. My alternative was to split an order up into parts in an attempt to avoid an outright loss ... For example, assuming that after your analysis you place a buy on an instrument of .10 units at x price and your stop loss is 20 pips below that ... wouldn't it be practical to put say 0.05 units on at your price and another 0.05 units at  the position where you would have placed your stop loss and then an actual stop loss further away allowing you more room for error.

I'm not saying that this is the only answer and would love to hear about any other tactics you might employ.

Linkback: https://www.forex.zone/general-forex-discussion/1/stop-losses-a-necessary-evil/632/
#1 - January 03, 2019, 06:37:13 PM

Admin

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I rarely ever use Stop Losses. For a few reasons actually.

First, they may not be honored anyways. For example, yesterday there was a fast crash of some 300 pips in seconds on USDJPY. In such a situation, your broker will not honor the stop loss anyways. The market usually rebounds in situations like this, which it has been doing. So you end up not only getting stopped out for more than you set, but you get taken out of the trade and miss out on possible profits.

Secondly, sometimes the market will move just enough to hit a SL before moving in the right direction. I have seen this in my trading before. A single pip can make a whole lot of difference. Many times, I know where the market will go, but my entry is a little off. If a trader has a good method for trading, it is only a matter of time until profit is reached and a little extra draw down is just a part of the game.

Lastly, I trade on a broker that offers low leverage. The max is 50:1, but usually it is around 25:1. Which means that if I am ever stopped out, there will still be a good chunk of my money left in the account since margin requirements are so high. If you are stopped out on a high leverage account, you will be left with nearly 0 in your account.

It's all a matter of preference. Some people use SL and some don't. Some use trailing stops and partial closes and others don't. I trade with money I won't lose sleep over. If I end up being wrong about a trade, my averaging in method usually works. If all else fails, at least I got a little excitement out of life :D
#2 - January 03, 2019, 09:09:07 PM
« Last Edit: January 03, 2019, 09:36:12 PM by Admin »
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aizafx

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Stop loss is an option on your trades, this is a feature in forex trading, you can use or abandon stop loss uses, but of course you need to accept all the risk if trading without stop loss when your order against the major trend, could leading account facing margin call 
#3 - February 03, 2019, 01:21:08 PM

zanurreload

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in my opinion Stop loss is an important part of forex trading. Stop loss is very useful for securing our trading account. Since I was disciplined using a stop loss I have never experienced a margin call again
#4 - February 04, 2019, 12:54:53 AM

Fxortrader

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Quote from: zanurreload on February 04, 2019, 12:54:53 AM
in my opinion Stop loss is an important part of forex trading. Stop loss is very useful for securing our trading account. Since I was disciplined using a stop loss I have never experienced a margin call again
there are some traders who do not use stop lose, as I trade do not use stop lose using only take profit 30-50 points, sir.
#5 - February 04, 2019, 01:06:31 AM

Miftah

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Quote from: aizafx on February 03, 2019, 01:21:08 PM
Stop loss is an option on your trades, this is a feature in forex trading, you can use or abandon stop loss uses, but of course you need to accept all the risk if trading without stop loss when your order against the major trend, could leading account facing margin call
Yeah thats true i foollow to this thread but you must help me about setting stop lose and then i profit 
#6 - February 04, 2019, 06:13:10 AM

Nendi71

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stopping losses is a thing that must be done if a trader has experienced a margin call, so as not to repeat for the second time then emotional control is very important to do to limit losses
#7 - February 04, 2019, 08:43:47 AM

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Quote from: Nendi71 on February 04, 2019, 08:43:47 AM
stopping losses is a thing that must be done if a trader has experienced a margin call, so as not to repeat for the second time then emotional control is very important to do to limit losses
Margin calls can still happen even if a stop loss is set though. Also, stop losses don't always get honored with a broker.
#8 - February 04, 2019, 12:29:04 PM

nawwa thalorenz

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In trading we are required to maintain money management to hold our account in trade, without good money management it will not reach its peak in the forex trading business, so we as professional traders must have a good and established trading plan, not we are approached by margin cal, making margins cal as good memories in the past that we have been through when we started the forex trading business, now the time to achieve glory and rise from adversity has become our time established in the forex business.
#9 - February 04, 2019, 12:46:43 PM
« Last Edit: February 04, 2019, 12:53:45 PM by Admin »

zanurreload

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Quote from: Fxortrader on February 04, 2019, 01:06:31 AM
there are some traders who do not use stop lose, as I trade do not use stop lose using only take profit 30-50 points, sir.
yes it is up to each trader sir, because each trader has his own trading system, there are those who use stop loss and there are those who do not use stop loss. But as long as the trading system that he uses produces a consistent profit in my opinion. But sometimes there are those who are not willing to do a cut loss when he is trapped in a minus ploating.
#10 - February 04, 2019, 12:55:05 PM

zanurreload

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Quote from: Admin on February 04, 2019, 12:29:04 PM
Margin calls can still happen even if a stop loss is set though. Also, stop losses don't always get honored with a broker.
I think by using Stop loss in a discipline we can at least reduce the potential for a Margin call, and of course we must be accompanied by good and correct money management. As I do, every time I enter the market I always give a risk limit of 2% of my balance and I always calculate my stop loss distance with the open position that I do.



#11 - February 04, 2019, 01:03:41 PM

Fxortrader

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all depends on the strategy that we control, if we trade with scalping techniques, for the placement of stop lose I think it is not effective, because the target profit is 1-10 points, so that the TP is finished quickly.
#12 - February 04, 2019, 01:25:10 PM

aizafx

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Quote from: zanurreload on February 04, 2019, 01:03:41 PM
I think by using Stop loss in a discipline we can at least reduce the potential for a Margin call, and of course we must be accompanied by good and correct money management. As I do, every time I enter the market I always give a risk limit of 2% of my balance and I always calculate my stop loss distance with the open position that I do.
Using stop-loss if trading with high lot volume also will useless to using stop loss, safe trading low risk and use stop loss will more secure than use stop loss but open trades with big lot size, although target as scalping, one mistake can leading us to face with bigger loss and maybe margin call
#13 - February 04, 2019, 02:25:45 PM

zanurreload

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Quote from: aizafx on February 04, 2019, 02:25:45 PM
Using stop-loss if trading with high lot volume also will useless to using stop loss, safe trading low risk and use stop loss will more secure than use stop loss but open trades with big lot size, although target as scalping, one mistake can leading us to face with bigger loss and maybe margin call
We recommend that you don't get used to using large lots in forex trading, because that will result in your margin call. Using large lots in forex trading is the same as you crossing the road by closing your eyes. One or two times maybe you can survive, but if done repeatedly it will make you hurt
#14 - February 04, 2019, 02:37:03 PM

ariezz

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Quote from: Blanco on January 03, 2019, 06:37:13 PM
Hi all,

We are all told that trading without a stop loss is like driving without a seatbelt .... But is that true? Do you keep a journal of your trades and if so how many times have you correctly predicted the movement of an instrument but lost out because your stop was hit before the price moved in the direction you initially thought?

I'm not suggesting that you abandon common sense and forego good money management, I'm merely asking if it should be the 'go to' tool that we use it as.

I suggested somewhere else that there were other options but my views were attacked as heresy. My alternative was to split an order up into parts in an attempt to avoid an outright loss ... For example, assuming that after your analysis you place a buy on an instrument of .10 units at x price and your stop loss is 20 pips below that ... wouldn't it be practical to put say 0.05 units on at your price and another 0.05 units at  the position where you would have placed your stop loss and then an actual stop loss further away allowing you more room for error.

I'm not saying that this is the only answer and would love to hear about any other tactics you might employ.
I agree, indeed if we trade without using stop loss it's like we are fighting without using weapons. Enemies can attack at any time and we have no weapons to kill enemies.

Risk management, especially stop loss, is very important because we know that the forex market moves erratically and that none of the analysis is one hundred percent accurate, so stop loss is vital.
#15 - February 04, 2019, 04:55:56 PM
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