Make stop-loss every time – it is an old rule but how many of us follow. Sometimes, we don’t put stop-loss out of fear of hitting that and sometimes we’re over-confident and we don’t even think of that. But I’ll explain its importance by showing practical examples of forex currency pairs – EURUSD and GBPCHF charts.
This is the latest technical chart of EURUSD on time frame H4 with my all favourite indicators – ADX candles, Doda-Donchian, Doda-Bands, BBSqueeze dark. You may download all of them freely from indicators section of this website.
The price after touching low of 1.40393 suddenly shoot up and touch a high of approx. 4.4290. Such a movement in few minutes. If someone had already taken short call on this currency pair based on Doda-Donchian, more than 50% of profit would have been wiped out. On the other hand, if some trader had make stop-loss, some more profit will be automatically booked by this time.
Let’s try to understand the same point by taking another latest technical chart of GBPCHF currency pair.
CHF currency is famous for its volatility. Sudden 100 pips down and then in next few minutes 100 pips up. There were numerous such instances in the past. That’s why, I always recommend NOT to trade any currency pair with CHF currency. After touching the low of approx. 1.25474, it suddenly went up to 1.36814 – that is more than 100 pips. So, not all your profit goes, but you’re in loss. You could have crunch this loss by putting suitable stop-loss.
Both the above examples are trying to show only one point – anything can happen in forex market at any time. So, always maintain stop-loss.