Do I need to use stop losses in all my forex trades?

[clueless-about-forex]

What are stop losses and is it advisable to trade without using them? Do you need stop losses if you are trading with a system?

Is it correct to assume that their use would depend on your system or should you set them on the basis of what you cannot afford regardless of whether you will be preempting your system?

[forex-scribe]

First things first, learn about stop losses here, right on our forum:

http://www.forextradingsoftwaretraining.com/articles/types-of-forex-orders-forex-stop-loss

Now let’s go on to your question about whether it is advisable to trade without them. In a word NO. Unless you are in it to lose money, stop losses are meant to protect you, to do exactly what their name say – to STOP YOUR LOSSES.

Seasoned traders wouldn’t dream of trading without them due to a couple of really substantial reasons.

1.   It is impossible to be monitoring the market 24/7. Many conditions in the market are unpredictable and if you depend solely on being the one to trigger a sell order before a catastrophic market turnaround, well that’s plainly and simply playing with fire. If the market glitches while you are asleep, you could wake up to find you were just wiped out.

2.   There are so many small gremlins that can creep into a trading day. Even if you just need to monitor a few hours at a time, a sudden power outage at your place or your brokers place, can isolate you from the market. An internet connection outage is another thing that can render you helpless. Those two incidents are not that uncommon and as you can see, they can give you a very bad trading day.

Some traders might say that they don’t have stop losses because their system already has one built in…ergo they still have stop losses right? The fact is, stop losses are built into practically all trading systems and you should make sure that they are in place. An auto-trading system has stop losses that should be in place already but it’s best to double check.

There are some “traders” who will advocate not setting stop losses for their own reasons. I would advise you that unless they are taking responsibility for your losses, then you better have your rear end covered in case some unforeseen event turns the market heavily against you.

The stop loss is there to protect your money, your precious capital. They are set at levels where you cannot or should not go beyond in so far as losses are concerned. This means that their levels will depend on your pain threshold and in the final analysis, by setting a stop loss, you are merely stating that you will not take losses beyond this point.

Trading without stop losses is simply gambling and it only takes one random event to wipe you out. So be a prudent trader and set your stop losses. There are no bragging rights in being wiped out.

[clueless-about-forex]

I guess if you put it that way, it does make a lot of sense to put stop losses particularly during hurricane season     pretty easy to lose communications and being out of touch during your preferred trading time is an exercise in tension and extreme stress management   

[forex-scribe]

I suppose not putting stops could be indicative of either too much confidence in your chosen system or just a gung ho attitude.

In the final analysis I suppose it is your money so the question of how much or how little to risk and how much we wish to leave to chance is a choice we all must make for ourselves.

Then should things go haywire and then we have no one else to blame but ourselves.

Settings stops to myself personally, is my way of ensuring that I can go to sleep even with an active market trading, because I know that if the market choose to fall apart at an inopportune time I will still be able to automatically limit my losses.