Importance of Stop Loss

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During the last couple of years, a debated a lot about the importance of stop loss placement.
Most EA’s don’t use it or use it very wide (up to 300 pips). That is doing very well for some time, until they hit a large trend. Then they get a huge account loss in a matter of minutes, or in the worse case, ruined account.
I saw some professionals which didn’t use stop loss, but they watched closely price movement and decide based on that, when they will exit. That is fine if you are very experienced, but I totally don’t recommend it if you are trading for less than 5 years.

 

Most amateurs I talked with, do not believe in stop loss placement, or they find it irrelevant. Some think as professionals do, that they will feel when the trade is not going their way and that they will then cut it off.
That is terribly wrong for retail traders and nonprofessionals. Stop-loss placement is one of the most crucial key element in forex trading, if you want to be profitable long term.

 

Another huge mistake, that most not experienced traders do, is to move their stop loss on an active trade. They shift it backward, thinking that the trade will go back their way soon. That way, they are adding on losses and risking much more than they previously intended.
These are the most common mistakes in Forex trading. Placing stop loss, not moving it, and calculating proper lot size, is the base on any forex system and strategy. Without it, you cannot be profitable long term.

 

Mislav Nikolic – Bull Capital

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