Not using a stop loss is one of the main reasons why new forex traders get burned before they’ve shown any profits whatsoever. Experienced traders know that having a stop loss active on any trade is absolutely essential to long-term profitable trading and that there is really no excuse for not using this simple mechanism as every single forex trading platform incorporates stop loss options.
There are a couple of reasons why a new trader may not use a stop loss. For one, it’s simply a matter of overconfidence and greed: if a forex trader thinks that there is a 100% chance of a trade going the right way said trader will sometimes be willing to gamble everything to make the ultimate profit.
Professional traders know that regardless of how good they are at interpreting market news or how good their forex signal providers are there will always be trades that go wrong and a stop loss is the only way to make sure these trades doesn’t go horribly wrong resulting in their forex software showing a zero balance.
Having said that, even seasoned traders let their emotions get the better of them and it is not a surprise that seasoned traders sometimes tell their forex software to move a stop loss further away from the opening position in the hope that a trade turns around. Doing this pretty much invalidates the trading system you have in place, and seasoned traders should know better.
In the end the essential lesson about stop losses is that you need to use them – in a pre-planned manner – on absolutely every trade because you can never be 100% certain of the direction the market is going to go.