Stop loss, good or bad?

Discussion in 'General Forex Discussion' started by Meindert, Sep 15, 2017.

  1. Meindert

    Meindert Trader

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    While trading I never leave my screen. Predominantly I do a sort of scalping and overall it's seldom that I have positions longer then 2 hour.

    Now everywhere I read is that stop loss is vital, but I also read of people who are very much against it

    While I start hating it. If I look at my total loss 1/3 is gone by stupid 1 or 2 second fluctuations sometimes they don't even show up on the chart.

    Today, my whole work from this week was blown, because a fluctuation triggered a stop loss, again, for a trade that would have ended in good profit.

    I work with little capital, but this is highly frustrating.

    Should take advise and dump stop loss al together and basically do a manual stop loss?
     
  2. Enivid

    Enivid Administrator Staff Member

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  3. Meindert

    Meindert Trader

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    But the gambling is your on your own control. The whole problem with using stoplos is the fact that it's triggered by very short fluctuations. For intrad trading not a problem, your stoplos won't be triggered. But I do scalping. And today I saw for the fifth time a perfect trade blown to pieces by a short fluctuation of 1 second. Even had it that it wasn't even visible on the chart. Looking back a hour later, as expected it was a perfect deal. The point is, I never ever leave my screen while trading, it's simply not done in my trading style. To see three days of hard work blown to pieces because of a stop loss is real enoying. Basically if I look back and do a proper calculation 1/3 of tge loss I made is because of these situations. My personal view about gambling refering to any kind of trade, it's the trader himself. Any business can become gambling. I think stop loss trading is perfectly fine when it fits your trading strategy. But in my eyes it's not a holy sign. Normally I take small profits and break trades of before my stoplos levels. That's slow grow of capital, but I strongly believe in the power of compounding interest. Why should I risk loosing good trades for automatic stop Los while I'm in front of the screen trading?
     
  4. I-Forex

    I-Forex Guest

    The use of Stop Losses in my opinion is based on strategies, I personally do not use them. I have no objection to the use of them if you are well versed in the volitility drawback, else you stand to hit them more often then you should.
     
  5. Enivid

    Enivid Administrator Staff Member

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    That's either a problem of using an inadequate stop-loss for the given market conditions or the market conditions changing abruptly voiding the trade. In case of the former, an method to set the adequate stop-loss levels is is a part of the trading strategy and should be mastered and practiced as the other parts of the strategy. In case of the latter, that's the stop-loss' exact purpose - protect the account balance from the abrupt changes in the market conditions.

    It looks like you are still in favor of using the stop-loss. You just prefer what is called mental stop-loss over the hard one. Mental stop-loss is a valid method of risk management, which could even be the only viable option for scalping, but it also requires a lot of discipline and market knowledge to apply. For the mental stop-loss is easily manipulated by our own emotions and biases, leading to a de facto trading without stop-loss, in its worst meaning - the loss is tolerated until the account hits a stop-out or the large floating loss becomes an obstacle to opening new trades.
     
  6. Meindert

    Meindert Trader

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    "It looks like you are still in favor of using the stop-loss. You just prefer what is called mental stop-loss over the hard one. Mental stop-loss is a valid method of risk management, which could even be the only viable option for scalping, but it also requires a lot of discipline and market knowledge to apply. For the mental stop-loss is easily manipulated by our own emotions and biases, leading to a de facto trading without stop-loss, in its worst meaning - the loss is tolerated until the account hits a stop-out or the large floating loss becomes an obstacle to opening new trades"

    Of course, with "stop loss" I only refer to automatic. I fully agree that mental stop loss is dangerous because emotions can be involved. But I learned the hard way to do a stop loss. (This may sound strange, but actually "stop loss" does not only involve trading, the principle of stop loss can save you a lot of damage in life itself. )

    I agree that market knowledge is very important, but also KISS principle. If as a scalper you open a trade, and for some reason the trend goes the other way. At 1,5 risk level I simply break of the trade. This may sound strange, but how long will it wait and keep hoping the trade will turn out fine? I said to myself, I'm a daytraders, I don't want to hold positions long. I do not hope for big profits per trade. My KISS principle is very simple, patience, hard work, be content with small things. I'm always reminded at the Dutch proverb "Who doesn't honor the small things is not worth the big things".

    Am I holy, no. But time after time I experience that breaking these principles Leeds to indeed a bad stop loss regime. Taking to big risks per trade. In the end loosing big time.

    So, yes you should always have a strategy for limiting your losses, stay disciplined, stick with it!!!! That's even more important then strategies to make profit!!!

    So what I'm referring to is not a total ignoring doing stop loss, but only if you let a machine do it. And I fully agree that saying so you should be so aware of the emotional factor during trading!
     
    Enivid likes this.
  7. Michelle Yeoh

    Michelle Yeoh Trader

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    Stop loss is the most important technical tool for me, because it provides me enough security of my trading capita! Now, I don’t face any unrealistic result in my trading because of using stop loss! I use different parameters of stop loss’s according to the trading system.
     
  8. ashouq

    ashouq Trader

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    Many professional traders uses this stop loss technique in order to reduce their risks in the event when the odds start moving against them so if they loose, they loose less because of this stop loss.
     
  9. forexadvance

    forexadvance Trader

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    It depends on situation. I personally do not use it, as my strategy is perfect and 90% trades closed in profit. When some trades goes in negative, I dont mind to close it manually. But when news data updated then I use sl.
     
  10. ashouq

    ashouq Trader

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    That's means you might be a day trader or scalper because SL is a recommended option and it is not mandatory though.. moreover i rarely trades during news release because the markets become more crazy and kinda unpredictable.
     
  11. Kevin Murdok

    Kevin Murdok Trader

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    I understand your situation and I myself have repeatedly been in your place. Treatment of stop loss is his absence :) But remember that if you do not put a stop-loss, then you need to strictly adhere to money management and not allow yourself to risk too much.
     
  12. willpower

    willpower Trader

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    Sometimes I feel stop loss bad because market just hit back after touching the stop loss. But overall it is a good thing if you are managing many trades and it will not keep you holding the losing trades and lock your funds.
     
  13. Nicolas Sanz

    Nicolas Sanz Newbie

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    I put stop loss always. Just depending on the situation at different levels.
     
    Kevin Murdok likes this.
  14. Gerrard1

    Gerrard1 Newbie

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    Stop-loss is rather good than bad. But it is not always appropriate. Especially when it is possible to wait and endure a drawdown and a minus in order to get the maximum profit.
     
  15. Nicolas Sanz

    Nicolas Sanz Newbie

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    "Yes baby"
    Just do not be offended. I wanted to say that I agree with you.
     
  16. Eric Owen

    Eric Owen Newbie

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    Guys, I advice you never use stop loss. They have the prospect of coming true.
    It is better to follow the trade on your own.
     
  17. James Williams

    James Williams Newbie

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    We can not plainly say stop loss is good or bad. It depends on your strategy. If you can manage your risk without using stop loss, then stop loss is bad for you. I personally use stop loss. My strategy allows me to use stop loss.
     
  18. Ethan$

    Ethan$ Trader

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    When I first started trading I tried to trade with stop loss. And often they saved from big losses, but more often they closed deals too early and I didn't receive any profit either. Therefore I only use the stop loss if I'm not near the screen. And at other time I close all deals manually.
     
  19. ambitionfx

    ambitionfx Trader

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    Not sure if SL is good or bad but I have blown 2 accounts because of trading without setting SL.
     

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