What to do: You open a trade, you are sure that you will close it manually and when the next 4-hour candle closes. You go to sleep 😴 to see when you wake up surprise!
Having too much liquidity ruin your trade, leaving you with a bigger loss than expected – or worse, no account to trade with. Sound familiar? If it hasn’t happened to you (yet), trust me it will. That’s why I never leave a soft stop loss and always use a hard stop loss. Here are 10 reasons to understand why:
1. Protection from volatility: Cryptocurrencies move quickly, and a hard stop protects you from sudden spikes or drops.
2. No surprises while you sleep: Your risks are controlled even when you're away from the screen.
3. Avoid emotional mistakes: Stopping too hard takes emotions out of the equation.
4. Prevents Account Wipeout Losses: Prevents you from losing more than you can afford.
5. Dealing with liquidity grabs: Placing stops with a buffer zone avoids falling prey to false wicks.
6. Simplify risk management: Losses remain predictable and under control.
7. Saves time: You don't need to take care of your trades.
8. Eliminates human error: Hard stops don't depend on your availability.
9. Promotes discipline: Keeps you committed to your strategy.
10. The future will thank you: Protecting your capital is protecting your future.
My advice for placing stops: Always set stop losses using a buffer.
Avoid obvious levels such as just below support or above resistance – they are magnets for liquidity grabs.
Instead, look for less traditional positions to give your trading some breathing room while keeping your risks low.
Bottom line: Strict stop loss is not just about protecting your account, it's about protecting your mindset, discipline, and long-term success.