I have seen only one person who could achieve stable profits without setting stop losses, and that was in a book, the person who invented the grid trading method, Shannon.

He used grid theory to achieve an annual compound interest of 29%. The grid trading method that is popular in the market now has been improved to some extent, and this method is only suitable for use in the stock market without leverage. There are also some essential points to consider with this method:

First, divide the funds into several portions, and only use one portion to buy stocks each time. If the purchase is wrong, continue to buy after the market falls to average the price, and close the position when the market reverses and rises.

Second, do not chase highs; start buying in batches when the market falls to a relatively low position.

Third, only very stable stocks are purchased, with a very low risk of delisting. Even buying ETFs can also diversify the funds into several stocks and ETFs to spread the risk.

Fourth, the requirement for returns is relatively low, and patience is needed in trading operations.

However, in practice, such a model can only be said to be close to not stopping losses, rather than completely not stopping losses. Why do I say this?

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Because the biggest risk of such an operation model is buying delisted stocks. After buying, the market continues to fall, and in the end, it can only be sold at a loss when delisted. Moreover, it is also possible to encounter a large one-sided market, such as entering a bull market one day, then this method will also fail.

So in fact, no matter how stable the method, it is possible to cause irreparable losses due to not stopping losses.

Stopping losses is an essential part of trading. Without this part, theoretically, trading cannot achieve profits.After all orders are placed, stop-loss and take-profit levels must be set. There are only two outcomes for all orders: stop-loss and take-profit. Taking profit is to lock in gains and secure earnings. Setting a stop-loss is to control risk and ensure our survival in the market. Stop-loss and take-profit in trading are akin to expenses and income in business; as long as the total income exceeds the total expenses, resulting in a profit, this is a successful business. This is also the fundamental logic behind profitable trading.

Not having a stop-loss is like running a business with only income and no expenses – how is that possible? Everything comes with a cost.

Some friends have asked me: If I don't set a stop-loss when opening a position, and let the order drift after a loss, the market will eventually turn around, and I can turn a loss into a profit, right? Theoretically, there seems to be a possibility, but in practice, it's not that simple.

The chart shows the monthly line of the Euro to US Dollar exchange rate. During the 2008 financial crisis, the price of the Euro to US Dollar once reached 1.6. If one had gone long on the Euro to US Dollar near 1.6 in 2008, without setting a stop-loss or closing the position, what would be the outcome now? The current price of the Euro to US Dollar is at 1.0.

Firstly, the order would be in a severe loss, causing the trader to be anxious daily, and the trading mentality would be poor. If you are still continuously trading other instruments at this time, it will definitely affect your performance. Moreover, from 2008 to 2023, 15 years have passed, and the time cost is also very high. It is uncertain when the Euro to US Dollar will return near the opening price.

Therefore, setting a stop-loss is crucial, and even more so in leveraged markets.

In markets with inherent leverage, such as futures and forex, if you open a position without setting a stop-loss, there is a risk of a margin call. For example, if you open a position with 10 times leverage, a 10% adverse market movement can lead to a margin call, and in actual operations, due to the relationship with the margin ratio, the order might be forcibly closed after a fluctuation of about 8%.

If your trading strategy is relatively stable, it must include a very strict stop-loss strategy. I believe many experienced traders have insights in this area and have suffered losses from not setting stop-losses.

So, it is possible that there are trading experts who do not set stop-losses, but we are all ordinary people who just want to achieve stable profits. To reach our sole goal, we must strictly set stop-losses and not let our trading risks expand indefinitely.