I am an extremely new trader, so bear with what you probably consider completely naivte and stupidity.
But, I have been a somewhat active trader the last 4 days and for the most part any loss I have experienced has rebounded within 1-2 days.
Even when I try to follow someone’s advice on cutting losses short, it is completely wasteful as I find out the price just rebounded later.
Excluding huge recessions, or huge geopolitical events, is it safe to say that a price can/is likely to steady back?
I’ve also been investing from a $500 account, so does that impact my perspective?
Or do prices really plummet? And become irreversible? Or if I hold it long enough will it eventually just come back?
Price won’t always rebound back into the black, and obviously four days is far from enough data for you to predict the future. Sometimes Price turns on you and just keeps going. Without a SL, you can simply be wiped out by some of the big market moves, particularly with a smaller account.
If you are set on trading without a SL, personally I’d advise a lot of demo trading to test your theory, over an extended period of time.
If you’re extremely new, stop day-trading. Get your set-ups from the daily charts, trade on these and use stop-losses set at appropriate places - either according to TA where your entry set-up is weakened by newer price action, or very wide so that it will never be hit but it will give you time to close it manually for a smaller loss as the TA weakens.
Have you tried basing your stops off of ATR? That used to be my problem also - ATR helped a bit, I still get stopped out a lot but not as much anymore. Also do you avoid trading when there’s high volatility due to news releases?
Using a stop-loss or not is really something that you will need to answer for yourself, as it will depend on your trading style and risk-tolerance levels. Everyone is different; what works for some may not work for others. Find what works for you and thoroughly test it.
$500 dollar is too small an equity to be hopeful that the price will turn around. Some trades will just go ahead to make your account hit margin call before it rebounds. When it rebounds after wiping out your account, what money will you take back then? Stop Loss option was placed there for a reason, it is left for you to decide whether it is relevant or not.
If you are extremely new, stop day trading on a live account. Go through the School of Pipsology here and practice on a demo account. And yes, please use a stop loss.
I agree with the others. As you claim that you’re extremely new trader then I would advise you to stop the live trading for a while as you’re risking too much at this point. Check the school here, find some free educational videos or books and practice on a demo account for at leasfew months. It’s too soon for you to do live trading. Don;t be afraid to ask questions here in the community, there are no stupid questions. You’ll find the help you need here. And yes, once you go live again, use a stop-loss.
Always use a stop loss even if you have 100% confidence on that trade. You never know what could happen in the next 1 minute that could wipe out your account for good.
Depending on the broker, yes…most will automatically stop you out at a certain level. If they did not do this, your trade could go in the negative and you would owe them money. Having it set up this way protects the liquidity providers and the traders. Some of the stop levels are a bit too conservative, admittedly.
I also think stop loss should be used even you are very sure about profit taking. Because when market is not in your hand you cannot say anything. For trader’s safety stop loss plays an important role when is used properly.
SL has been used as an weapon among the forex trader today. And a trader can keep his trading risks lower if he can actually supervise his funds with real techniques. And you can use SL properly when you can properly analyze market situations, so be careful about market behaviors.
However, most of those same traders aren’t making consistent profit either. I am.
If you’re trading with a $500.00 account, the lot size you trade has to be relative to your account size.
I use what I call a soft SL. I don’t actually place a SL on my trade. Rather, I know how much I’m willing to risk and I monitor each trade according.
Maket Makers are Notorious for pushing price to hit amateur trader’s SL, and if anyone thinks they can’t see in general where most amateur traders place their SL,
that thinking alone speaks for itself why most traders lose money.
There is a small clutch of strategies that demand you do not use a stop-loss. If you used one they would not work. These are sophisticated and demand large well capitalised accounts. All other strategies need a stop-loss.
