Stops are a necessary evil for any trader who wants to stay in the game. Some traders may try to avoid using stops but all it takes is one surprise headline and the game is over.
I recall one of our old-time Global-Buew.com Forex Forum members saying something like this:
Use a stop and that is exactly what you will find the next morning when you are sopped out.
Of course, he was being factious but the reality is that you are damned if you do and damned if you don’t use a stop. However, with that said, in the end, as the title of this article says, use a stop and you will live to trade another day.
Use Stops: Live to Trade Another Day
One of the major flaws that retail forex traders have is a reluctance to take a loss. Losing is part of the trading business and many traders, especially new ones, do not like to admit they are wrong. This may sound obvious but I have also seen experienced traders get stubborn, lose discipline, and override their stops.
This leads many to not use stops on the assumption (or hope) that the market will come back to them. This may work during range markets or consolidation but when the pattern changes to a trend or sharp move in one direction, those trading based on hope can see their accounts wiped out.
Don’t underestimate what I am saying. I have seen it happen too many times.
So traders beware. Don’t think you can outlast the market, especially when in a leveraged trade as your pockets are not deep enough. Accept losses as a cost of doing business and hopefully your gains will exceed your losses. In any case, using stops to protect your capital means you can live to trade another day.
But there is something you can do about it by learning how to trade on the strong side of the market where your stop is less likely to get triggered. Stay tuned for another article where this will be discussed.
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