Enough said?
This daily chart of the EURCHF shows the dramatic drop that occurred on the 15th of January when the Swiss Bank decided to let the EUR drop lower than its predetermined low of 1.2000 Swiss Francs. From the high to the low of the day represented a 2359.6 pip drop. If you were long on this with 1 standard lot, you would have lost over $23,000 in one day. That would wipe out many traders’ accounts.
Although this was an extremely rare occurrence, this is a wakeup call for traders as to what can happen. Most traders think that the goal of trading is to make money. The real goal is to preserve our account. If our account is wiped out, we cannot make back our losses. If we live to trade another day, we can make back our losses.
After that initial drop, this pair climbed almost 1000 pips. Traders that avoid stops, reason that stops take them out of trades before it moves in their favor. Even if you set a stop, far from where you enter the trade, it could prevent a wipeout of your account.
Let this be a lesson for all traders.
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