For any novice traders taking the time to view the ForexLive Blog, last night was a very good example of why you should ALWAYS be using stop losses on your trades. Nights like last night don’t come along too often, but it only takes one night like last night, a slightly bigger position than normal and no stop loss and your whole account could be gone in one fowl swoop.
How do you decide where to place your stop loss? I tend to place my stops above and below recent highs and lows on a daily basis as i feel that affords them the most protection. You should always know first and foremost, where your stop is going to be before you even consider entering your trade. Once you know where you want to place your stop you should then work out what level you are targeting best and worst case and you are then in a position to determine the risk/reward payoff for your trade and whether your entry level is appropriate.
