If you want a monosyllabic answer, then yes! Your trading strategy can be anything you want. But whether it is worth trading without a Stop Loss is a completely different question. Most Forex guides will unequivocally declare that trading without a lifebuoy is suicide. But most novice traders face a variety of issues related to setting exit points. I think it is worth considering this issue in more detail first and only then making a decision.
Does Stop Loss Have Disadvantages?
There is no point in describing the benefits of Stop Loss. You probably already know all about it. But the problems that most novice traders face are a less popular topic. Let's take a look at that more closely:
- Emotional problem - some traders feel like a failure, because for them a triggered Stop Loss is direct evidence that they've made a wrong trading decision.
- Many novice traders hesitate to close a trade even when they realize that it clearly will not work out. Instead, they wait until Stop Loss is triggered.
- An exit point is often set at support or resistance levels where the price reverses. As a result, due to the wrong choice of the entry point, the trade is closed with a loss, although the direction itself was chosen correctly.
- A huge amount of Stop Losses is triggered due to short-term volatility or false breakouts.
- Cautious traders set their Stop Loss too close to the entry point. This gives the trade no wiggle room. As a result, Stop Loss is triggered due to even minor volatility, while the direction is chosen correctly.
Do Professional Traders Use Stop Losses?
Many sources say that professional traders always use Stop Loss. Do they?
Professional and beginners’ trading styles are very different. An experienced trader understands the market on an instinctive level and knows that drawdown is an integral part of the process. They do set a Stop Loss but always leave enough room for the price to fluctuate.
An experienced trader doesn’t need to set an exit point as he already knows when the trade is definitely a losing one and when the market simply hesitates before reversing in the desired direction. A professional usually closes all his trades manually. Stop Loss is set only in case of an unforeseen situation.
Intraday Trading Without Stop Loss
Many traders recommend trading intraday with a Stop Loss. Unfortunately, psychology works in such a way that inexperienced traders often hold unprofitable positions because they are not disciplined enough. In this case, Stop Loss orders may reduce potential losses.
Scalping Without Stop Loss
Should you use Stop Losses if you are a scalper? No ultimate scalping strategy exists, and Stop Loss keeps your investments safe. On the other hand, scalp trade usually lasts a few minutes or less. That's why scalpers often open and close their traders manually if market conditions allow it. It's better to use Stop Loss if the market is too volatile, as you can sustain huge losses.
How to Trade Without Stop Loss
Whether it is worth trading without exit points is up to you. However, if you are a beginner, better refrain from such a strategy until you begin to distinguish between normal price fluctuations and real reversals.
If you already have some experience and want to try something new, here are a couple of tips:
- Start moving your Stop Loss a little further from the entry point. This will give your trade more wiggle room. However, you should not risk too large amounts of money. First, reduce the size of your trades to balance the risks.
- Make sure you have enough margin in your account to withstand the drawdown. Take into consideration all your open trades.
And most importantly: first test the new approach on a demo account. It makes no sense to risk real funds on a brand new strategy. Good luck!