One of the misunderstandings: no stop loss
Why is it wrong not to stop loss?
As long as the operation will be right or wrong. Doing it right will naturally bring benefits, but what about doing it wrong? The only choice after making a mistake in the foreign exchange market is to admit and correct the mistake immediately, and stop loss is the main means to admit and correct the mistake. Any transaction should not be regarded as a desperate gamble, but a molecule in the game of probability. If you don't stop loss, you are unwilling or have no courage to admit your mistake, or subconsciously think that you won't make mistakes, or you are lucky. According to Murphy's law, if something is likely to go bad, then this possibility will become a reality, small mistakes and misunderstandings will become big mistakes, small losses will become big losses, and eventually become unmanageable.
In other words, every investor will not live to be 500 years old and spend most of his time waiting for the loss position to turn into profit; Every investor's capital is limited and can't support unlimited losses. Investors who don't correct their mistakes are obviously prepared to live for another 500 years, and they have also dug a tunnel to Fort Knox (the land where the United States reserves gold).
Stop loss may be a new mistake, just a possibility, but not stopping loss is definitely a mistake. Although most people are unwilling to bear certain losses, considering the limited time and funds, it is obviously wise to exchange local small losses for overall initiative.
Myth 2: Random Stop Loss
Most novice speculators, after suffering huge losses because they don't stop loss, generally learn a lesson, regard stop loss as a strict discipline, and then go to the other extreme and fall into a new misunderstanding: disorderly stop loss.
The consequences of disorderly stop loss are obvious, and no account can withstand long-term continuous stop loss. In the face of thinner and thinner net account value, investors tend to return to the old road of no stop loss again, swinging repeatedly between stop loss and no stop loss.
Investors have to jump out of the thinking barriers of stop loss and no stop loss to find the answer to the question. What is the purpose of stop loss? The purpose of stop loss is to control risks, but it must be recognized that stop loss is not the only means to control risks. There are all kinds of traps in the speculative maze, so are the mistakes we make and the risks we face. Only by thoroughly eliminating the root causes, making fewer mistakes and taking fewer risks can we reduce the number of stop losses and make each stop loss necessary and worthwhile, rather than unnecessary and self-harming.
Myth 3: Sometimes stop loss, sometimes no stop loss.
After realizing the necessity of stop loss and tasting the bitter fruit of disorderly stop loss, investors still have a dead end, that is, sometimes they stop loss and sometimes they don't. When the loss is within your acceptable range, such as a loss of 30 points, you will choose to stop loss, but once the stop loss is extended to 100 points, you will not stop loss. This is actually to decide whether to stop the loss according to the size of the loss. The correct way is to decide whether to stop the loss according to whether you have done something wrong.
Stop loss is not everything, it is just a safety belt and parachute on the road to investment. Not wearing a seat belt does not mean that you will definitely crash, but wearing a seat belt will make the investment more stable. Stop loss is necessary, but it can only be used as a preventive measure, and the abuse and misuse of stop loss will only cause harm.
For most investors, only by making fewer mistakes, reducing the frequency, operating in small positions, and persistently implementing operational discipline, can we upgrade from amateur to professional and embark on a long-term and stable profit path.