Every experienced trader has a story about the trade that got away. The one where they ignored their stop loss, hoping the market would turn around, only to watch a small loss become a devastating one. Ignoring stop losses is one of the most dangerous mistakes traders make, and understanding why we do it is the first step to fixing it.
Why Traders Ignore Their Stops
No one plans to ignore a stop loss. Yet it happens constantly. Here are the psychological reasons behind this destructive behavior:
Loss Aversion
Research shows that the pain of losing is psychologically about twice as powerful as the pleasure of gaining. When your stop is about to be hit, your brain screams at you to avoid that pain by any means necessary, including moving or ignoring the stop.
Hope and Denial
Once a trade goes against you, it is natural to hope it will recover. You start looking for reasons why it might turn around. This hope prevents you from taking the rational action of accepting the loss.
Ego Protection
Taking a loss means admitting you were wrong. For many traders, their ego cannot accept this. By not exiting, they avoid the psychological admission of being wrong.
The painful truth: A stop loss only works if you honor it. A stop loss you ignore is worse than no stop at all because it gives you false confidence while exposing you to unlimited risk.
The Real Cost of Ignoring Stops
Let us look at what actually happens when you ignore your stop loss:
Example: The Cascading Loss
Original trade plan:
- Buy stock at $100
- Stop loss at $95 (5% risk)
- Target at $115 (15% profit)
What happens when you ignore the stop:
- Stock drops to $95 - you decide to hold
- Stock drops to $90 - you hope for a bounce
- Stock drops to $80 - you are now down 20%
- Stock drops to $70 - you finally sell at 30% loss
Your 5% planned loss became a 30% actual loss. You now need a 43% gain just to break even.
The Math of Recovery
This is why ignoring stops is so devastating. The math of recovery works against you:
- 10% loss requires 11% gain to recover
- 20% loss requires 25% gain to recover
- 30% loss requires 43% gain to recover
- 50% loss requires 100% gain to recover
- 75% loss requires 300% gain to recover
Small losses are easily recovered. Large losses from ignored stops can take years to recover from, if ever.
Common Excuses for Ignoring Stops
Traders are creative at rationalizing their behavior. Here are common excuses:
"It will come back"
Sometimes it does. More often, it does not. And even when it does, the opportunity cost of holding a losing position is huge.
"The stop was too tight"
If your stop is too tight, the problem is with your trade planning, not with honoring the stop. Fix the planning, but always honor the current stop.
"This time is different"
It almost never is. The market does not care about your reasons for why this particular trade should be an exception.
"I will just move the stop a little"
Moving stops wider is a gateway to ignoring them entirely. Once you start moving stops, you have abandoned your risk management system.
The Professional Approach
Professional traders treat stop losses as sacred. Here is how they think about it:
The Professional Mindset
- The stop loss is set before the trade is placed
- Once set, the stop is non-negotiable
- A loss is simply a cost of doing business
- Honoring stops protects capital for future opportunities
- Every ignored stop increases the probability of account blow-up
Strategies to Honor Your Stops
Here are practical ways to ensure you never ignore a stop loss again:
1. Use Hard Stops
Enter your stop loss order at the same time you enter your trade. Do not use mental stops. The order should be live in the market where it will execute automatically.
2. Reduce Position Size
If you find yourself wanting to ignore stops, your position size is probably too large. When the dollar amount at risk is painful, we make irrational decisions.
3. Pre-Accept the Loss
Before entering any trade, mentally accept that you might lose the amount you are risking. If you cannot accept that loss, do not take the trade.
4. Keep a Trading Journal
Document every time you are tempted to ignore a stop. Track what happened when you honored the stop versus when you ignored it. The data will be compelling.
5. Review Your Ignored Stops
Go back and look at trades where you ignored your stop. Calculate what you would have saved by honoring them. This exercise is often eye-opening.
Building Stop Loss Discipline
Discipline with stops is like a muscle that needs training:
- Start small: Trade with tiny positions until honoring stops becomes automatic
- Create rules: Write down your stop loss rules and review them before every trade
- Accountability: Share your trades with a mentor or trading buddy
- Celebrate discipline: Reward yourself for honoring stops, not just for profitable trades
- Learn from others: Study traders who blew up their accounts from ignored stops
When the Stop Gets Hit and Price Reverses
This is the scenario that haunts traders: you honor your stop, then the price immediately reverses and goes to your target. This feels terrible but consider:
- You cannot know in advance when this will happen
- For every time it reverses, there are times it continues against you
- The times you honor your stop and avoid a bigger loss far outweigh the times you get stopped out before a reversal
- You can always re-enter if conditions warrant
Track Your Stop Loss Discipline
Pro Trader Dashboard helps you analyze your trading behavior, including how often you honor your stops and the impact on your results. Build better habits with data.
Summary
Ignoring stop losses is one of the most common and costly mistakes in trading. The psychological pull to avoid losses is strong, but the consequences of giving in to this impulse are severe. Small losses become large losses, and large losses can end trading careers.
Make honoring your stops non-negotiable. Use hard stops, reduce position sizes to comfortable levels, and build the discipline muscle through consistent practice. Remember: every professional trader has learned this lesson, often the hard way. Learn it now before it costs you everything.