Did you know that the stop-loss feature could make your portfolio = 0? Most of you use this feature randomly and do not pay attention to what may happen to your portfolio. Here are the negatives and positives of this feature:
Stop-Loss Feature: A Warning for Beginners
When you start your journey in a trade, whether through immediate trading or futures, the stop-loss feature may seem like an effective tool to protect your investments. However, it is essential to fully understand all aspects related to it, especially if you are at the beginning of your journey.
- Advantages (if you have studied the market well):
1. Protection from Major Losses: The stop-loss feature provides a way to set a specific limit on losses, helping to reduce potential damage in case of sudden market fluctuations.
2. Psychological Comfort: The stop-loss feature gives you a sense of security and calm, allowing you to activate it during times when you will leave your computer or fear disconnection, battery depletion, or when you cannot monitor the market, such as during sleep or being occupied with other matters.
- Disadvantages (if you are a beginner):
Despite the benefits, there are some drawbacks that you should consider:
1. Exposure to Unnecessary Losses: Many traders suffer from the price dropping for a short period without reaching the stop-loss level, before rising again. For example, if you entered the trade at $200 and set the stop-loss at $150, the price might drop to $149 and then rise again. This phenomenon occurs frequently, especially with platforms using algorithms that closely track investor behavior.
2. Loss of Profit Opportunities: Using the stop-loss feature may lead to an early exit from the trade, causing you to miss valuable profit opportunities, especially when trading in strong currencies with a good reputation.
3. Close Monitoring in Futures: When trading futures, you must be very vigilant, as it is preferable to monitor your trades closely and exit yourself if you notice a downward trend. Over-reliance on the stop-loss feature may lead to greater losses.
If you are a beginner, it is advised to avoid relying on the stop-loss feature in your immediate trades. Instead, if you are trading in well-known strong currencies, patience and caution are the keys to success. For futures trading, it is important to monitor your trades closely, as relying solely on this feature may not always be in your favor.
