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Importance of stop loss placement in forex trading.


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132 replies to this topic

#1
Hunny Gee

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FOREX TRADING: IMPORTANCE OF STOP LOSS PLACEMENT
Posted Image


A lot of traders do not believe in stop loss placement.
Some believe in mental stop loss placement. meaning that when they feel that a trade is not going their way, they will then cut it off.
That is so terribly wrong. Stop loss placement is one of the most crucial key if you want to make forex trading profitable.
Another mistake traders make is that they shift their stop loss. They shift it backwards, thinking that the trade will just go back a little more and will come back their way. And sure enough, most of the time, they took more losses than they would have if they stayed on their initial stop loss.
In the chart above, is an example of the importance of stop loss placement.
Usd chf h4
In the highlighted box, thats a pin bar. When some guys see this pin, they will naturally take it down and the ideal place for their stop loss is the horizontal line in orange that is drawn.
Scenario A) if the trader did not place a stop loss, or a mental stop loss – look at how high the usd chf pair went upwards. Their account will be blown or had a huge huge loss.
Scenario B) Trader shifted their stop loss backwards from the initial orange line thinking that the trade will go back down. They would have taken a huge loss as the move went up terribly fast and would have gotten a big blow to their account
Scenario C) Trader sticked to their initial stop loss, they would have just gotten a standard loss of the % risked in their account, based on their money management. And this is just one of the trades among the plenty, therefore this loss is not a big deal.
I hope you guys can see the importance of placing and sticking to your stop loss. Or else your account will be blown before you know it.
Ezekiel Chew
Asia #1 Forex Mentor from www.asiaforexmentor.com
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#2
stezz

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i never use stop loss
and the effect is i loss 50 $ in my first day of trading
and now i just realize that stop loss is very important
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#3
pinoycity

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i never use stop loss
and the effect is i loss 50 $ in my first day of trading
and now i just realize that stop loss is very important


What happened and why did you lose that amount in your first trading day? I would assume that you entered the market, did not set an SL and left and closed your computer.
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#4
rexway

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stop loos for me is a good way to safe guard your fund ,stop loos play an important roles when it come to trading, with the help of stop loos one can minimise the risk of loosing
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#5
budado

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i never use stop loss
and the effect is i loss 50 $ in my first day of trading
and now i just realize that stop loss is very important

50 dollars? how di you trade 50 dollars? what pair did you trade and what broker site? And also how much do you have overall in your account? I'm sure you have more than 50 dollars becuase even if you get MC you will never going to have zero funds right away.
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#6
Adnan

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I never placed Stop Loss in my trades when I was a newbie but later understood the importance of placing a SL, when I had to suffer a few account blow ups. For a newbie or even for the professionals, placing a SL is a vital option as it Leads to avoiding losses far beyond expectations...
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#7
budado

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What happened and why did you lose that amount in your first trading day? I would assume that you entered the market, did not set an SL and left and closed your computer.

Its seems he only not forgot to put stop loss he also stop post in here. lols.
....
That's why when I trade and after decide what strategy to use and in case that strategy need to put SL and suddenly the price goes near my SL. instead of changing my SL. I close my mt4. Because I know if I don't do that I will simply go emotional and trade with my emotion. lols.
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#8
Adnan

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Its seems he only not forgot to put stop loss he also stop post in here. lols.
....
That's why when I trade and after decide what strategy to use and in case that strategy need to put SL and suddenly the price goes near my SL. instead of changing my SL. I close my mt4. Because I know if I don't do that I will simply go emotional and trade with my emotion. lols.


Changing SL can work against you as I myself have tried it in the past out of emotions and the bad thing about my this practice resulted only in a greater loss for me. Sometimes it might work for you but risking a few more bucks far beyond your expectations can become really frustrating as it has been for me in the past...
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#9
flybiz08

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Stop loss is a type of pending order that he forex trader places in anticipation that if a trade or an open position goes the other way round to the negative side, then the trade should be closed automatically at the set order price which is the stop loss. It prevents a trader from losing more than required amount while trading.
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#10
PROPENSITY100

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Stop loss is a vital tool available to a trader to manage risk more efficiently. Stop loss can save us from a severe loss. However stop loss should be used judiciously and efficiently placed otherwise it can close a good order with a loss.
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#11
standart

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Stop loss is a vital tool available to a trader to manage risk more efficiently. Stop loss can save us from a severe loss. However stop loss should be used judiciously and efficiently placed otherwise it can close a good order with a loss.


yes, stop loss is really important to protect traders from suffering huge loss and keep their account in control. stop loss placement is really good topic and has been widely discussed in many forex forum. many beginner already ask about it and I think the answer already appear in thread above. previous support or resistance level is good spot to place stop loss level.
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#12
riddick09

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I always think of stop loss as life saver. Since, stop loss is a way to handle our losses and that we will not going to drain or reach margin call easily. Since, we can't always monitor our trades and the best way to not have these big losses is to have stop loss order and to have also the take profits which will back up our analysis.
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#13
PROPENSITY100

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Stop loss is very important tool to limit our losses and survive in Forex market for a long time. Stop loss enables us to protect our capital and saves us from a severe loss. However a trader should know how to use a stop loss properly.
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#14
Achiever2015

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Stop Loss truly serves a great help in managing our loss and profits and thus reduce our exposure to trading loss. Stop Loss in themselves, however, are not the guarantee of reducing loss themselves, the trader must ensure the SL is placed rightly, not allowing greed or fear to influence the decision.
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#15
sidejob

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This is one of the great feature that will so much helpful for many newbie or even for expert too, it will make them more easier to set and minimize the risk that they can hold from forex, so overall i can say this feature is a great help and also like blessing for many traders in forex.
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#16
savehouse

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This is one of the great feature that will so much helpful for many newbie or even for expert too, it will make them more easier to set and minimize the risk that they can hold from forex, so overall i can say this feature is a great help and also like blessing for many traders in forex.

st
yeah,i totally agree with you,stop loss the one of the feature in Forex trading that can guarantee safety low loss and high profit.though one need to understand how to use it and understand how the trending of the market work for one to know the best entry time and the best time to apply stop loss when trading.aside from the indicator we have as a trader,stop loss is the best feature that can also safe us from much loss.
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#17
sidejob

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st
yeah,i totally agree with you,stop loss the one of the feature in Forex trading that can guarantee safety low loss and high profit.though one need to understand how to use it and understand how the trending of the market work for one to know the best entry time and the best time to apply stop loss when trading.aside from the indicator we have as a trader,stop loss is the best feature that can also safe us from much loss.

In the end for new traders it is very important to use this feature, in every trading since they don't know how to manage their funds well sometimes or in most cases they will have a lot of problem with it and with Stop Loss feature that offered in some platform will truly help them to have better trading.
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#18
rexway

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Yea the function of stoploss can never be mention all if a trader is using stoploss he can trade without much fear so as per this I do hope that I will try my best and get good stoploss level set for proper trade
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#19
sidejob

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Yea the function of stoploss can never be mention all if a trader is using stoploss he can trade without much fear so as per this I do hope that I will try my best and get good stoploss level set for proper trade

at least it will make them more comfortable when they want to learn and also we need to know that forex actually is risky field so we need to reduce the risk in each trading we do and actually that is a hard part to do, and they prefer this way since this way is easy for new traders
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#20
gaban

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50 dollars? how di you trade 50 dollars? what pair did you trade and what broker site? And also how much do you have overall in your account? I'm sure you have more than 50 dollars becuase even if you get MC you will never going to have zero funds right away.



The problem is not how much money we've got to get a return but how do we manage the funds in our account so that we can get the maximum return. Even, i just used $35 to start trading with my broker now.
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