Trading strategy without stop-loss orders

Stop-loss orders are useful. They limit your possible losses and execute an automated cut in case if the prediction was wrong. Most of FOREX courses teach a beginner to use stop-loss order on every single position they open, and this approach has a logical background.

But I noticed that there are lots of examples, when the price action reverses right after triggering my stop-loss and goes exactly in my direction without me in the market. I have loss in such case, instead of having profit after generally correct prediction.

Moreover, I was wondering why brokers teach beginners about to put stop-loss orders so insistently? The answer is simple. They have information about levels, where the biggest volume of stop-loss orders is placed, and this information allows them to hunt. Just try to think what happens, when a stop-loss order is triggered.

For example, you have a long position of EUR/USD with an entry price at 1.24000 and stop-loss order at 1.23500. Imagine a big market player, who have enough liquidity volume to move the market by injecting sell positions. The result is the slide of the price, reaching and triggering your stop-loss, which is a sell action. If your volume is big enough, the price action continues to fall, moving even lower for some distance. Let’s say 10 pips further South. What is the next action of such a hunter? He closes his short positions with profits at 1.23400 and opens long positions, according to the general trend. The price reverses and moves back to the level where it started if not above 1.24000. What do you have as the result: stop-loss triggered -50 pips. What does have that hunter as the result: DOUBLE profit +120 pips.

Of course, small traders do not have even a chance to compete with huge market players due to the difference in volume. But they can have accounts deep enough to withstand such a temporary price actions. And small traders can be smart enough to realize that these movements are fake.

The strategy to trade without stop-loss orders is dangerous, so traders must have an accurate calculations of possible negative impacts like margin call, and use risk management rules in a highly disciplined way. Timing is also crucial. Traders who use weekly trading plan have to be patient enough and be ready to add a second barrel of their positions in the same direction on a reasonable distance from the first entry point, in case if it went underwater and in case if the main trend direction has been chosen correctly.