In day to day trading, once you take a decision whether to go long or short on certain pairs, the next thing that matters really lies on your risk management, or how much you are putting at stakes.
You see, I do have a number of colleagues here who loves trading the forex market. They do trade quite well and make money quite consistently. The only thing that worries me is that most of them do not use stop loss at all. The reason behind this habit is that no matter what, they believe the price will come back to their entry level.
In certain sense, yes the price do come back especially in a ranging market. But what about a major breakout? It could come back but you may be out for months waiting for it to come back.
The fact is, no one likes losses but in trading, losing is just part of the equation. You can't avoid it.
To me is simple. If you plan to trade small with solid account margin and no stop loss, by all means go ahead. But please consider these...
1. If you trade without stops, chances are you are trading without a system, or without any pre-define entry and exit strategy.
2. You hardly learn from your trading. You are like a blind man that walks around hoping to bump on a beautiful girl who is willing to marry you with unconditional love. Wake up man! There's no such thing... or perhaps once in a trillion.
3. You see... trading habit is just like a driving habit. If you do not develop a safe habit from the beginning, will you ever reach a level where you can safely grow your account to a six or seven figure levels?
4. What if you're wrong? The reason to have stop loss is to stop you from being wrong to the point where there is no return. Staying too long in the wrong trade is not a pleasure experience at all.
5. The market force is inevitable. You can never fight it... If you have no stops, you are like fighting a battalion (which is the market) till the last drop of your blood. Chances are you will not survive.
Sure taking losses are painful but in real world, no one gets it right all the time. Plan your stops accordingly and implement it, in a way it is neither too small nor too big for you to absorb the losses.
Focus on accuracy and trade what you see base on your own analysis. If you're right, stay, if you're wrong - just get out and stay out... but with defined limit. Do not rush your decision and trust me, it is not easy. Most of the times, it's all about getting into the right trade that matters.
My simple advice is, regardless of what indicators that you may be using - Always take your chances base on calculated risk.
Look at the chart carefully, study the price actions, daily high & low, and where likely the market is going. Make your trading decision base on these factors rather than blindly entering a trade base on signals. The signals or indicators are simply helpers, and there is no indicators or signals that are 100% accurate. Just remember that...
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