Trading without stop loss: Trading Without Stop Loss Do the Professionals Forex Traders do it? Forex Sentiment Board


Traders that refuse to take the loss, end up losing an entire account. There’s a final more basic way to trade without stop losses. That is simply to hold a small reserve balance in your trading account. You then rely on your broker to tell you when your margin limit is approaching – that’s assuming they do give you notice, not all do. With this approach the trader buys out of the money call or put options that will cap the downside losses on one position or even on the entire account. With dynamic stop loses you need a piece of software to keep watch on your account such as an expert advisor.


As we can see from the above, EUR/USD and USD/JPY can be quite closely correlated. Obviously here we are not dealing with a perfect 100% correlation, however, they are mostly moving in the same directions. It means exiting Your position on an exit signal whether You are in gain or in loss. That’s what I call “dynamic stop loss” or post-fixed stop loss. But options do have a cost even though by using out of the money options this cost is relatively small. Moreover, as I explain below your stop losses may not actually be providing you with the protection that you think they are.

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Traders place their Stop Losses too close to their entry point. This does not give the trade enough breathing room to pull back. This is especially true when traders oversize their positions, they focus on monetary losses in their Risk-to-Reward ratio, and neglect the trading pair’s range of movement. A big problem in the Forex education space is that traders are educated on the importance of using Stop Losses.

They close trades manually if the trade goes against their predictions. However, it’s important to note that closing orders at the right time without hesitation requires experience and a high level of emotional intelligence. Trading without a stop loss is incredibly challenging and can only be done under specific market conditions. If currency movements are too volatile, trading without a stop loss can result in huge losses. A smaller position size means that the hard stop loss can be moved further away so that it is hit less regularly.

The use of leverage means you could lose more money than is in your trading account so you always need to have a hard stop loss in place to protect yourself from a devastating loss. There are several professional traders who do not advise us to trade major economic announcements without having a stop-loss order in place. However, this view is not universal to the entire community. Perhaps, traders with low or no leverage might be more justified in taking that risk. Finally, there are some market participants who prefer trading without any leverage. For them, the market volatility may not present such risks as those with higher leverage levels.


Recently I saw a YouTube video explaining that professional traders don’t use stop losses because doing so alerts market makers and algorithms to where their orders are. What’s more, once the SL orders are placed, it’s recommended not to move them. It’s important to keep in mind that the power of being in an active position can influence the decision-making process. Stop Loss orders protect the trading account from blowing up. They limit losses and help traders avoid emotional trading.

They just don’t have the muscle to swing the market to eat-up stop losses in pacman-like fashion. If your broker is a dealer they’re also making a market for you. Unlike an ordinary broker a broker-dealer can take market risk. They could potentially be on the other side of your trade or those of many other clients. Not all traders use stop losses, for one because there are often better ways of managing risk, such as with hedging as we’ll see below.

The software continually checks the floating losses on open trade positions. When a loss-limit is reached, one or more of the positions is automatically closed. Alternative loss limitation methods include some “multi-pass combinations.” According to these techniques, a trader should start with a small-size position. Then, as the market situation unfolds, the trader can increase their position. As a result, a trader’s position will include a series of orders that may have different opening prices, different sizes and even different directions. The scalping strategy usually involves very short term trades, typically with 1 to 15-minute timeframes.

How Viable is Forex Trading Without Stop-Loss Strategy?

But first, here are some of the arguments against using stop losses. For example, if you want a 50% chance of the stop loss being reached after 12 hours you would need a 45-pip stop distance. If you want a 25% chance, the stop distance has to increase to 72 pips. If you’re using stop losses in your trading strategy and they’re working for you then all well and good.

Amateur traders see their stop as the thing that works against them and so they try to come up with reasons why trading without a stop loss will make them better traders. For example, instead of one large position at a 20% position size, a trader could initiate 10 individual positions at 2% position size. The level of exposure is the same but each position is smaller allowing the stop loss to be moved further away. The key is to size your positions small enough so that your hard stop loss is hit only on rare occasions. Trading a conservative size is the approach we usually take with the strategies on our program, although experienced traders can add leverage if they wish. The moment you look away from the chart, there’s a chance that the market will drop below the level you wanted to get out and you will have messed up your risk management.

If opening a trade is too risky, the trade is not worth executing. For example, there are various market participants who are using hedging strategies and therefore see no need to use stop-loss orders. Alternatively, some traders use no or very small leverage, therefore, using stop-loss orders might not make much sense to them. Hedging means that one trade position is covered by another. In a straight hedge for example a long EURUSD position is covered entirely by a short EURUSD position of equal size. The difference between the two determines the profit – but once both trades are in place the profit or loss is locked at that amount.

We recommend that you seek independent financial advice and ensure you fully understand the risks involved before trading. There is a strange phenomenon in the online trading world whereby prices seem to gravitate towards wherever Stop Losses are clustered. Considering the scale of this phenomenon, it’s unlikely to be manipulation, but rather a widespread and common behavior exercised by traders everywhere.

If a professional trader entered a position with no stop loss they would be sacked immediately. They wouldn’t even be able to say goodbye to their colleagues. Getting stopped out is painful and it is always better to exit your trades according to your strategy rules if you can. There will always be reckless traders but the fact is if you trade with leverage you expose yourself to a huge amount of risk.

During November and early December 2019, both of those pairs were consolidating. Then we can see that from the new year days until the late September, EUR/USD and EUR/JPY were engaged in a downtrend.

Perhaps this is because the trader subconsciously sees the stop loss as a safety net. In the same way that riding a bike with safety stabilizers could make you over-confident as well as more prone to take uncalculated risks. With some strategies, hedging can be a safer and more reliable way of protecting downside losses than stop losses. A professional trader objective is actually not to allow their Stop Losses to be triggered but to decide for themselves if their trade is invalid and close it themselves. Go on any website, trading forum or listen to traders talk on social media and eventually the conversation drifts towards trading without a stop loss.

If you’re using the locking strategy skillfully, you have all chances to limit your losses and even close with a profit. The main problem with stop losses in Forex is that there are standard rules for setting them, i.e. above or below local extremes, support/resistance levels, etc. Most amateur traders religiously follow these rules to place their stop-loss orders.

Many traders I have met are stubborn and reluctant to take even a small loss on a trade if they think their opinion is correct. I have come across traders who are so confident in their opinions that they do not think a stop loss is necessary. Well, basically a currency option represents a contract, which gives its buyer a right to buy or sell a specific currency at the predetermined exchange rate. The data or duration at which the option can be exercised is also written in the agreement. In the third stage, both of those currency pairs recovered and rallied from the middle of Autumn 2019 until the end of that year.

Figure-1 shows how wide the stop loss needs to be versus the probability of the stop being reached. This example is for EURUSD over a 12 hour time frame but that’s not important. Trading without stop losses might sound like the riskiest thing there is. Yet with the right risk-control in place it’s not as crazy as it first sounds. Averaging into a position is a countertrend trading method that requires excellent self-discipline and accurate risk assessment. Naturally, before you choose to attempt Forex trading without a Stop Loss, you should test this approach on a demo account.

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