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Trading Forex Without Stop-Loss?

November 22, 2010 (Last updated on July 31, 2013)

Stop-loss is one of the best invention of the financial trading. At the same time it’s also one of the most cursed thing in Forex — how many times was your stop-loss hit just before the trend reversed in the direction of your position? For many traders stop-loss orders are the reason of depression and despair. Unfortunately, not many of them understand that if they didn’t use stop-loss the results would have been even worse.

Recently, I’ve stumbled upon a “strategy” promoted by some Nigerian trader on one forum. His idea was quite simple — sell USD/JPY on some pivotal levels and don’t set up a stop-loss. His argument — if you have enough margin you can lose only if USD/JPY goes down to 0.00. In his opinion it’s about 8,300 pips now or if you trade 1 mini lot it’s $1/pip, or $8,300 margin required, which is quite normal for a standard Forex account of $10,000. The problem is that for 1 mini lot of USD/JPY 1 pip isn’t equal to $1 — it depends on the current USD/JPY rate. Using the pip value calculator you can easily see how 1 pip value grows as the USD/JPY rate declines; for example, at USD/JPY = 40.00, 1 mini lot pip is $2.50. Of course, such a huge decline on USD/JPY is improbable, but trading without stop-loss you always risk huge to earn small, which eventually eradicates your capital.

So, what’s your experience trading without stop-loss in Forex?

Have you ever tried trading without stop-loss?

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If you want to share your thoughts on the possibility of trading Forex without stop-loss orders, please, feel free to reply using the form below.

40 Responses to “Trading Forex Without Stop-Loss?”

  1. TradeProfits

    I have tried it some years ago and I am done with such a “strategy” (or lack of the same). I guess it works for some but position sizing is everything if you are trading this way..

    Reply

    admin Reply:

    Position sizing is everything even if you don’t trade without stop-loss ;).

    Reply

    Aziz Reply:

    I totally agree with you. Used wisely ‘no stop loss’ strategy worked for me on many occasions.

    Reply

    admin Reply:

    And what have it done to your account balance on the occasions when it did not work?

    Reply

    naseer Reply:

    there is no account left for next time it means positions wipe out account

    Reply

  2. Waqar Abbas Rizvi

    In my opinion stop loss is used by the traders who do not know the trading machanism.Either take profit or take loss,no stop loss/profit.A trader,having the trading knowledge,plan to take the position at a certain place and firstly decide place of loss and if traded position goes in favour the decision of taking profit depends upon a special formation of candles.In this way loss will be minimum and profit maximum.ALL time graph should be on the screen with some tecnical studies i.e,bolingr,macd,rsi and 5 moving averages.15 minutes graph is the pivital graph and when a special formation of candles take place the positin is taken and profit/loss is taken again on the formation of candles.Before taking position the trader should decide,mkt is bullish or bearish, and it can be well judged from the three period graphs,daily,weekly & monthly.I have experienced more than 70% trades successful with big profit if not huge profit and minimum loss in case of unsuccessful trade.Market data is a deceiving activity and up /down of price rests only with technical machanism.

    Reply

    admin Reply:

    I don’t quite understand how what you’ve just said proves that stop-loss is used only by the traders who don’t know the trading mechanism? Are you confusing stop-loss with margin call?

    Reply

  3. the wise one

    stoploss is a trap used by wall street crooks to take money from innocent traders. Wall Street crooks never use stoploss, they know where they can take the market. They control the market, why bother with stoploss?
    Only ignorant retail traders use stoploss “recommended” by wall street crooks.

    Reply

    admin Reply:

    What do “Wall Street crooks” do when the market goes 10%/day against them and they are without stop-loss?

    Reply

  4. NoStopLossTrader

    I’ve been trading without stoploss for 5 years. However, I am very careful using my leverage. If I have 10000 in my account, I just buy 1 micro lot (1 lot = 1000). If I have 100000 balance, i just buy 1 mini lot (1 lot = 10000). It requires decipline and nerve of steel.

    Reply

    Stefano Reply:

    Excellent consideration.

    Reply

  5. Victor

    Never put stop loss. I did one experiment with 100 dolars without stop loss and with stop loss. My strategy was if trend goes against you buy in another direction as it means same as stop loss just you not giving money for a big guys, so my 100 dollar in 1 moth grow till 4,500 and final stage it 100% profit, and after I did with stop loss I lost 100 dollar in 4 days, I did 3 times more and lost every time so in 4 days some in one week, I I was exhausted with stop loss. You never know what market will do next, only if you nostradamus or vodo or alien or educated in finance it may work, but not for ordinary people.

    Reply

    admin Reply:

    You were lucky that the price fluctuated well through your hedged positions. What if you’d enter long position at near 1.4900 on EUR/USD without stop-loss?

    Reply

    Aziz Reply:

    Hi Victor, I know this post is more than one year old. I like not to use stop loss, it worked for me too. But couple of times I was not careful and lost a lot, probably because wrong position sizing. regards

    Reply

  6. Victor

    If you say enter long and after realised it against you, there is two ways, close position and give away yours hard earned many loss or sell it would be the same as stop loss except you are not giving your hard earn many for someone, and what warranty do you have if yours 1.4900 will go up to 1.6000 or 1.7000 it could go whatever it wants, do you know if it will go? probably not. only one man could tell you if it will go up or down, mother nature or alien or head of father bank.

    Reply

    admin Reply:

    You are right – it’s hard to know where the market will be going. But what you do is recommend to open a second position in addition to a losing one, considering that we don’t know where the price is heading. If one would open a EUR/USD long at 1.4900, it would mean more than 1,000 pips floating loss on July 12. If one’s trading on margin, it would probably hit a margin call for him. But even if it didn’t, it would mean that he’d still be in loss of ~600 pips and his money locked for almost 3 months. What’s the strategy if one has such position still open and the EUR/USD goes to parity? To 0.5?

    If the main point is just in opening an opposite position instead of triggering the stop-loss, then it only looks that you aren’t incurring the loss from the first position. The moment you enter the opposite position is effectively the same as closing the losing. When you’ll close your opposite position in profit, if the first one (loosing) remains open, it would be equal to reopening the long position at that new level. It does nothing more than fooling you with false safety, spending more on margin and overnight swaps.

    Reply

  7. Victor

    Only one thing. I did experiment. It only my strategy. I know it crazy but for me its works. I can’t look every time I’m hit by stop loose, and for strange reason it always hits just in 1 pip and I’m off the market, after you hit by stop loss you have to think about new strategy. And just I’m not waiting till market will hit 600 pip loss, before open opposite position. And yes I’m closing losing positions but in only after I’m making profit. It just works for me this way, hate draining my account, better I will see in balance high amount of pips.

    Reply

  8. Pierre

    It is all about being patient. If u r using the bollinger indicator u should know the price will almost always oscillate between the two bands. It is a matter of waiting until the price recovers from one end to another. Of course a lot of adrenaline can flow but try to develop confidence.

    Reply

    admin Reply:

    Have you ever seen a long-term chart of a currency pair? You could get stuck for years (if not decades) with some positions without stop-loss,if you have enough margin, of course.

    Reply

  9. Victor

    I do know that, I could stuck for a years. I’m develop some sort of strategy without stop loose, it is pays off for me. Just I’m loosing confidence after putting stop loose and usually loosing, after confidence is gone what could be left. hopefully in time I will get enough confident and knowledge to trade with stop loss. And Thank you Pierre for advice I will take this in account. My personal indicator is stochastic slow and on some time frames RSI, I’m trying use indicators as low as possible, as in past they will miss lead you.

    Reply

    admin Reply:

    I am glad that trading without a stop-loss turns out to be a good strategy for you. Just don’t forget about the danger of margin-call/stop-out and that the money could be earn you more profit if you’d invest it in something other than the long-term losing position.

    Reply

  10. nihal bhat

    i think no SL is better ,but have discretionary exit based on chart.

    e.g. i will give a good example. i did demo trades those who shorted AUDUSD,EURUSD,GBPUSD at around 1.0255, 1.3490, 1.5690, would have gotten stopped out last night, if they had a 70 pip stop loss. however those trades were with the underlying trend on all higher TF(which is down), and consistent with fundamentals (euro zone difficulty, US economic data still poor) and shorting after a large increase in downtrend is higher % probability, also they were close to their daily trend line a good place to go short

    since i did not put SL in demo account( i am in asia time zone, so i will need to leave position running to gain max. benefit), i did not get stopped out for pointless 70 pip SL, instead it looks like i benefited:

    aud/usd – 35 pip
    eur/usd 85pip
    gbp/usd 100 pip

    or average since they are about the same thing about 80 pip, aud/usd not the best one to short fundamentally as higher interest rate(4.5%current – but if threat of eurozone it interest rate will go down causing panick to below 95 cents).

    any comment. the only way i would have benefited would be to have an extra large stop loss(say 140pip), or no SL at all. my position was perfect 100% correct.

    Reply

    admin Reply:

    Discretionary exit is also considered a stop-loss. You just don’t set it as an order with your broker, but you use it to prevent excess losses in case the trade goes in wrong way. Trading without stops means that you’ll wait until either profit target is reached or your broker stops you out due to the lack of margin.

    Reply

  11. nihal bhat

    another way would be have these factors if u are swing trader

    1. hard wide stop loss like 140-150pip
    2. good entry area(higher % entry)
    3. helpful fundamentals for your position
    4. extra discretionary exit based on chart, not related to no.1 (say if chart says bad on short term TF okay to exit prior to hitting full SL)

    if u went short last night using those criteria u wouldve made gain. if u had a SL of 70 pips it would have resulted in a losser as eur/usd and gbp/usd had massive NFP spikes upwards, when the NFP numbers were disappointing

    Reply

  12. tneveca

    I was making more money on forex when I first started out because I ignored stop-losses and let my bad trades ride until they eventually came back and made a profit. Sometimes I would be down 70%, but I’d just leave it for three days and surely enough it would back and make a profit. Now that I’ve taken a trading course and continue to read trading books, I do nothing but lose money left, right, and center. For some reason practice makes worse. Stop-losses are death by a thousand cuts. I’m wonderin if perhaps the dumb approach is really the right one.

    Reply

    admin Reply:

    The problem of comparing results of with/without stop-loss is that they produce extremely different trading outcomes:

    1. With stop-loss, you are cutting your losses short and take many small losses with a comparable chance of getting some profit. In some short time you’ll be able to see if your strategy is profitable (has an edge) or it isn’t.

    2. Without stop-loss, you cut your profits early compared to the losses and produce many small profits with a small chance of getting a huge loss (100% of the account usually). In some short time, you are likely to show some end profit, but in a longer period of time, a stop-out due to insufficient margin is inevitable and the end result is negative. But in the meantime it will give you an illusion of being right about the market quite a few times, preventing you from seeing whether your strategy has an actual edge or not.

    Reply

  13. sorinate

    Here is the problem in these assumptions. You are discounting the one thing that makes any strategy work, and that it time frame. If you look at market trends, you wil realize that markets move in waves and wave within, that said no matter which way you will toss your trade you can expect that it will reatrace, or can you ?

    The answer is not always!, but more often then not. The more often the not is the key. You cannot get attached to a single trade, and learn to manage your exposure and your margin accordingly.

    They you can employ either strategy. The no SL strategy will be more profitable while you apply the rules above, but if you neglect the above you will fail. The SL strategy works well as well. Both are good, but no SL startegy MUST be augmented with Hedging. If you dont understand hedging, and are unwilling to learn then stick to SL.

    Eventually if you look within a timeframe you will notice that it doesnt move always one way. For example USDJPY, even tho monthly keeps going down, there are spikes within, at which point you can downsize and reduce, or close even with profit on a well executed trade sequence.

    It is about trade management and not SL vs NO SL, the one drawback to SL is that you have a fixed resolution on your trade management, and are unable to apply creative technique.

    Best traders know both techinques and know to apply the right one at the right time.

    Reply

    admin Reply:

    Wait, how do you augment no-SL trades with hedging? Because to me it seems that hedging can only worsen the case here.

    Reply

  14. William Musoke

    My first attempts to trade without a stop loss were horrible because I was trading too many lots with a small bank. But later I reduced my lot size, and ever since all my trades are without stop loss.

    The logic behind my decision to trade without a stop loss was/is that if i set a short take profit level, say, 20 pips, there are higher chances that the market will hit that level than the chance of it going to say, 100 pips against me. At the same time, since I would only be trading a small percentage of my bank, even if the market goes against me by 1000 pips before it comes back to hit the take profit, I would not consider that to be a loss. The only true cost to me for holding that trade would be the interest charged on that trade, plus the fact that capital would be tied on that trade. In any case, I do not just enter trades randomly, but enter just those trades that my system has highlighted as having a higher chance of hitting the take profit.

    I think though my approach of not using stop losses is most suited for experienced traders, and better still, those with an investment mindset as opposed to those who want their trading account to be the source of their monthly income.

    I also think that using stop losses is more to the advantage of the broker that it is for the trader.

    Reply

    admin Reply:

    Strange ideas you have, my friend :). And what if the losing position goes 10000 pips in loss and not return to near your take-profit levels in twenty years? Doesn’t seem like an experienced approach to me.

    Reply

    richtrader Reply:

    @admin:
    Im currently applying same strategy with no stoploss, if the losing position goes 10000 pips wrong, which is indicating very strong trend, i have already make HUNDREDS position in that trend that make me huge profit.

    All i have is only 1 losing position,

    Seems very promising to me dude. And im really make profit with this kind of strategy for 2-3 months. Im going to test it until desember, and im gonna trade with huge money after that

    Reply

    admin Reply:

    Yeah, no-stoploss strategies work fantastically well until their first margin call.

    Reply

  15. Frankie

    Very interesting topic. However, looks like there won’t be any definite answer.
    I have been trading with and without SL for 2 years. Trying to figure out which way is better. Always amazed with those testimonials in the advertisements claiming that the students after completing the Forex courses could make profits in the regions of thousands or tens of thousands, within a few months. Based on my own experience, you are not going to be able to make these huge profits (within the short period of time), if you follow what you were taught. While the logics are there but to make huge profits within a short time frame require beginner’s luck (like going to casino).
    Just to share my experience. No much difference from most of you. Without SL, you have to monitor the market very often and get very tensed up because you don’t know how much you are going to lose. With SL, you know how much you are going to lose. That’s the reason why the courses taught us to set SL.
    In the real world, I heard the professional traders trade large no of contracts to get small no of Pips eg 5 to 6 Pips. And that doesn’t make sense to have SL as they will be monitoring the chart every minute.
    So looks like they can only afford to trade once and have to be correct for that one trade. Otherwise, even if they exit the trade with say 5 Pips lost, then they will need 2 other trades potentially to make 5 Pips nett.

    Anyone care to share how the professional traders trades to get 5 Pips each day ?

    Thanks.

    Reply

  16. Abu

    I trade without a stop loss. I would not advise it for a newbie trader, but with experience your skill increases to the point of making very accurate trades. Also with experience, the psychological aspects are more manageable, whereby you don’t fear anymore as you watch price go temporarily against you. Of course, there is always that possibility of those what-if moments.

    Coming into forex via a former stock trading prop shop job, scalping is my specialty. And is more fun to me. Remember, trading isn’t always about profits. Holding or riding out a trade is smart, but it is really only a preference of choice. I find 1 pip scalping on the 5 min more enjoyable, and more so since I am good at it. But you have to have a precision approach; only the obvious perfect set-ups. On the 5 min, price obviously can go against you. But glance over to the higher timeframes and you will see how less scarey it is when that price on the 5 min is being stubborn. In those cases I just relax, and wait. With no stop loss.

    From my experience, there are 3 aspects to consider with regards to trading with or without a stop loss.

    1) The topic tends to be debated in a black or white manner. I.E. is it good or not to trade without a stop loss. Unfortunately, that argument approach tends to omit a vast amount of variables. Such as the trader’s experience, methods, money management skills, etc. It cannot be a good or bad argument as a whole, but rather good or bad specific to each trader.

    2) The number 1 key in trading without a stop loss is the type of broker you have. It is a MUST to use a non-dealing desk broker, ECN or direct STP into the market. I would never trade without stop losses on a broker that is working against me. I want to bypass that nonsense. I personally use FXCC. The environment on the 5 min timeframe is much different with these kinds of brokers. I can take way more risks because some dealing desk is not trying to beat me up. Once you start driving on a smooth paved road versus gravel and potholes, everything changes for the better.

    3) I withdraw my profits weekly, often twice a week. I do not build up capital in order to have the opportunity to increase lot sizes, or etc. I usually start fresh each week with my original deposit amount. A decent broker can do instant withdrawls even if a fairly low amount. I would never personally let my trading account grow and grow when trading without stop losses. It might sound like a contradiction with regards to trusting my skills, but why risk 3 months of profits due to some freak act of nature.

    Reply

  17. Aziz

    Hi,

    Good article. I also try to follow no SL strategy. I

    I was reading some reviews of FXCC, most seemed good but there seems to slippage issues. Any other broker you can suggest please?

    Thanks and regards

    Reply

  18. Drake

    What has surprised me is the extent to which brokers go in publicizing use of stop loss. It makes me suspicious; that perhaps there is a way they themselves profit from it. Yes they are right in pointing out the dangers of trading without SL but their insistence and abhorrence for strategies which don’t include it boarders on the ridiculous! Me, am a pensioner with little else to do. I can afford to sit in front of my PC and intervene with a manual stop anytime I find the trade going against me. Why should I bother with putting a Stop Loss? Advise me.

    Reply

    admin Reply:

    Because a trader can decide to move such “manual” stop-loss back in hopes for a reversal, killing the idea of risk limit? If you have iron will and are always in front of your PC, then I guess you do not need automatic stop-loss. I, personally, prefer to automate everything that can be automated.

    Reply

  19. dominique

    So what is your strategy for no stop loss?

    Dom

    Reply

    Andriy Moraru Reply:

    Generally, I use stop-loss on all my trades. I believe it is acceptable not to use a hard price stop-loss if you have a hard time stop-loss (trades are closed at the end of the week/day) and you calculate your position size accordingly to volatility risks.

    Reply

  20. Johnd303

    Thank you for your blog article. Great. ddekeegdddgb

    Reply

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