Can I trade without a stop loss? I was often asked this question by the forex trading community. When someone is asking this question, there are two things that I know about the trader even if he is a total stranger to me. First, there is very high chance that he is placing trades with fixed contract size. While it is neat and tidy to have a nice round number of contracts size, but it might not be in your best interest to do so.. The concern is that the trader may be taking on too much risk for certain market conditions or if he is trading with a small trading capital. Secondly, he is risking his entire account where any single trade place may lead him to the risk of ruin. One general rule if you are asking yourself this question, it is best that you stop trading immediately and take a re-look at forex trading. Many people promises the great profits in forex trading. While it is nice to hear that, it will also mean that the downside risk to forex trading is high too. Trading with unlimited risk is one sure way to get yourself burnt. I will say that be responsible for your money and for your family. Be cautious and be vigilant. Practise money management to make money. Having a stop loss is the first step to practising sound money management. Fact: Not Every Trade Will be a Winner Forex money management is a very important aspect of Forex trading, all Forex traders will have losing trades at one time or another it is unavoidable. Given this fact, and recognizing that this fact applies to forex trading, we need to be prepared for the worst. And the worst will involves loss, equity draw down, and the peaks and valleys of trading. What makes it possible for successful Forex traders is a good money management plan to help them ride through the losses, the losses are simply viewed as a business expense. When you trade without money management rules, you are in fact gambling. You are not looking at the long term return on your investment. Instead you are only looking for that "jackpot". Money management rules will not only protect us, but they will make us very profitable in the long run. Gambling casinos understand that not every game of blackjack or poker will go in their favor and be a winner for the house. In fact, they have no idea which hand played will be a winner or loser. But, they do know that they have a winning edge over the public playing at their casino and over time they know they willl win more than they lose. It is a game of probabilities, just like in trading. We cannot determine 100% that our next trade will be a winner. Often, we don't know. However if we learn from back testing of our system, we know the percentage of winner per annum. Trading with money management forces traders to prepare for the worst, having known the fact that any trade will not bring to the risk of ruin would greatly help a trader lower the emotional stress of trading. Be a professional trader and not a gambler. Trading without a stop loss most often is gambling unless you are trading some grid systems. Trading without a stop loss is most often not the best practice of trading the forex market. Only professional traders with certain trading system will employ a no stop loss trading system. Feel free to use this article on your website or ezine as long as the following information about author/website is included.
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