Trading without a Stop Loss
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Should traders always place stop losses on their positions, or can they omit placing them and monitor their trades so that they exit manually?
A subject up for debate.
My objective here is not to say who is right or wrong; I will simply state the facts. Do you want to tell me what you think?
Very often, traders who do not place a stop loss constantly monitor their positions. So they can't leave their screens. They stay, watching out for the moment to exit a position manually, in profit if possible. These traders are more generally aggressive scalpersor swing traders.
Primarily, because it takes more time.
They also believe that they are able to manage volatility better manually; and avoid the wicks that would trigger their stop loss.
They also think that stop losses are an invention created by brokers to make themselves rich off their clients’ backs; that stop losses allow brokers to target the situation the majority of their clients are in; and therefore that this is a way for brokers to alter their prices more effectively (in cases where the brokers are not too scrupulous).
For extraordinary news (such as the withdrawal of the minimum rate from the SNB), stop loss or no stop loss, we could see that the results were the same. “Guaranteed” orders, guarantee exiting positions, but not necessarily at the price that could have been set. Or you have to find a broker who really guarantees orders at the price, even if the market skips the order price on a gap.
For unexpected news, however, movements can be several hundred pips. A trader who does not use a stop loss may not be able to exit a position manually. In the middle of a rally, his order to exit a position always risks being rejected.
The first negative effect of not placing stop loss orders is to have to constantly monitor your positions.
The second negative effect of not placing stop loss orders is that you must always know how to hold your trading strategy, and be psychologically strong in trading. Effectively, a trader who does not place a stop loss order will always be tempted (with each trade in latent loss) to keep his position; or even average his position upwards or downwards.
Finally, not having a stop loss means calculating the position amounts in a more or less random way. No strict money management.
Traders who always place a stop loss on their positions are more generally swing traders, day-traders and all types of traders who do not scalp the markets at all times.
Because with a stop loss, they feel protected, and that: they do not have to constantly monitor charts to exit manually in case of loss; their money management is perfect, and in accordance with their trading plan; they avoid the temptation of downward averages (pyramid schemes),
because they are prepared not to make the most of each movement (in case there is no chance of exiting with a capital gain).
But it is also because they have heard from trainers and stock exchange sites that it is always necessary to have a stop loss. No one can tell a trader who is just starting out: "no, don't place a stop loss..."
For extraordinary news, traders who always place a stop loss will be out of the market. But not necessarily at the desired price. We've seen this before.
For traditional news, simple volatility and spread risk triggering a stop loss. So traders risk seeing their positions exited even though the price did not necessarily really reach that amount.
Isn't it long and boring to always place a stop loss?
The main negative effect for traders who always place stop losses is to see their positions exit due to volatility while the movement goes in the right direction in the end.
Finally, traders who always place a stop loss are therefore forced to move the stop loss value away from the real price at which they believe their scenario will no longer come to fruition. Do they not maximize losses using this practice? That’s true, isn’t it? What is the point of placing stop losses above the last highest point or below the last lowest point? If the movement is already halfway between the entry price and the stop loss, that is already not a good sign.
Stop loss or no stop loss? I'd like to say that it's better to always place one, but at a distance from the price at which we would really consider manually exiting at a loss.
This keeps you covered in case of a surprise. It is quick to place the stop loss because you don’t need to be accurate to the pip. In theory, this stop loss should never be triggered (exit manually before).
And we calculate our position amounts based on the theoretical stop loss. This remains approximate, but it is better than taking random position amounts.
What do you think of people who tell you to always place them? What do you think about placing stop losses?
A subject up for debate.
My objective here is not to say who is right or wrong; I will simply state the facts. Do you want to tell me what you think?
Traders who do not place a stop loss
Very often, traders who do not place a stop loss constantly monitor their positions. So they can't leave their screens. They stay, watching out for the moment to exit a position manually, in profit if possible. These traders are more generally aggressive scalpersor swing traders.
But then why don't some traders place a stop loss?
Primarily, because it takes more time.
They also believe that they are able to manage volatility better manually; and avoid the wicks that would trigger their stop loss.
They also think that stop losses are an invention created by brokers to make themselves rich off their clients’ backs; that stop losses allow brokers to target the situation the majority of their clients are in; and therefore that this is a way for brokers to alter their prices more effectively (in cases where the brokers are not too scrupulous).
What are the risks for traders who do not place a stop loss?
For extraordinary news (such as the withdrawal of the minimum rate from the SNB), stop loss or no stop loss, we could see that the results were the same. “Guaranteed” orders, guarantee exiting positions, but not necessarily at the price that could have been set. Or you have to find a broker who really guarantees orders at the price, even if the market skips the order price on a gap.
For unexpected news, however, movements can be several hundred pips. A trader who does not use a stop loss may not be able to exit a position manually. In the middle of a rally, his order to exit a position always risks being rejected.
Adverse effects for traders who do not place a stop loss
The first negative effect of not placing stop loss orders is to have to constantly monitor your positions.
The second negative effect of not placing stop loss orders is that you must always know how to hold your trading strategy, and be psychologically strong in trading. Effectively, a trader who does not place a stop loss order will always be tempted (with each trade in latent loss) to keep his position; or even average his position upwards or downwards.
Finally, not having a stop loss means calculating the position amounts in a more or less random way. No strict money management.
Traders who always place a stop loss
Traders who always place a stop loss on their positions are more generally swing traders, day-traders and all types of traders who do not scalp the markets at all times.
But then why do some traders always place a stop loss?
Because with a stop loss, they feel protected, and that: they do not have to constantly monitor charts to exit manually in case of loss; their money management is perfect, and in accordance with their trading plan; they avoid the temptation of downward averages (pyramid schemes),
because they are prepared not to make the most of each movement (in case there is no chance of exiting with a capital gain).
But it is also because they have heard from trainers and stock exchange sites that it is always necessary to have a stop loss. No one can tell a trader who is just starting out: "no, don't place a stop loss..."
What are the risks for traders who always place a stop loss?
For extraordinary news, traders who always place a stop loss will be out of the market. But not necessarily at the desired price. We've seen this before.
For traditional news, simple volatility and spread risk triggering a stop loss. So traders risk seeing their positions exited even though the price did not necessarily really reach that amount.
Adverse effects for traders who always place a stop loss
Isn't it long and boring to always place a stop loss?
The main negative effect for traders who always place stop losses is to see their positions exit due to volatility while the movement goes in the right direction in the end.
Finally, traders who always place a stop loss are therefore forced to move the stop loss value away from the real price at which they believe their scenario will no longer come to fruition. Do they not maximize losses using this practice? That’s true, isn’t it? What is the point of placing stop losses above the last highest point or below the last lowest point? If the movement is already halfway between the entry price and the stop loss, that is already not a good sign.
My point of view on the subject
Stop loss or no stop loss? I'd like to say that it's better to always place one, but at a distance from the price at which we would really consider manually exiting at a loss.
This keeps you covered in case of a surprise. It is quick to place the stop loss because you don’t need to be accurate to the pip. In theory, this stop loss should never be triggered (exit manually before).
And we calculate our position amounts based on the theoretical stop loss. This remains approximate, but it is better than taking random position amounts.
And you, what do you think? Stop loss or not?
What do you think of people who tell you to always place them? What do you think about placing stop losses?
