🟩STOP LOSS IS:A stop-loss order is an order that automatically closes a losing position once the price hits the pre-specified level. We usually calculate SL in pips, but there can be many ways to set it. It can be time based, percentage based or volatility based. For some investors SL is some piece of critical news, which alters their perception of the value of the asset. Regular stop losses can be many and varied too, for example trailing stop. Also, we sometimes move SL to entry after the half close to protect the gains and make our position risk free.However, all situations I listed above have one thing in common and it is the fact that the SL was used!
🟥Honestly, I am amused by the massive number of people who send me screenshots of their MT4 with several open trades on the same pair all of them without SL and with 90% of account lost. And they ask me what should they do? A great illustration of what is would take to recover from such a loss, is on the drawing above. With the 90% loss, you have only one tenth of the original account left. That means you need to make ten times more money than you have left just to recover your losses. 999% gain needs to be made just to have your old account back. It took you a day to blow it, and might take months to recover the losses. This is the brutality of the trading. The market is unforgiving and will punish you if you treat is without respect. If you are careless or if you make mistakes. The market always comes back to collect, waiting for the moment you drop your guard and relax for a second.
Please always use Stop Loss, because, as it happens, it stops you from losing too much!
I Hope you guys learned something new today✅
Wish you all Best Of Luck👍
😇And may the odds be always in your favor😇
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Managing your capital is one of the most important things to learn for successful trading. Keep your losses small. SL orders are the way. When I take a long position the very next thing I do is place a SL based on -2 ATR. If I stop out of the position, it's not a big deal. It's the cost of doing business plus it keeps my losses small. I live to trade another day. One of the biggest mistakes new traders make is taking a position and riding it all the way down to zero hoping things will turn around. Hope is not a strategy. It's OK to stop out of a position, reassess the trade, then return when the trend is right.
I used to trade without stops but that led to some unacceptable losses. Always use stop losses and if you're getting stopped out too often, maybe trade smaller position sizes with wider stops and/or work on your trading strategy.