Moving Stop Up to Breakeven: Helpful or Harmful?

Discussion in 'Risk Management' started by jbob, Mar 19, 2008.

Moving Stop Up to Breakeven: Helpful or Harmful?

  1. Helpful

    40 vote(s)
  2. Harmful

    37 vote(s)
  1. jbob


    You enter the market and the market quickly moves to give you a profit. Therefore, what should do with this potentially great trade? Let's punish the trade and move the stop up to breakeven!

    The market is showing strength, so why should you jump out at weakness just because it retraced to your entry. Shouldn't we be riding our trades? You have your initial stop in place if the market truly does become weak.
  2. Well, I can only speak from my past experience but it has definitely saved me a lot of money. The rub is deciding when you should move the stops to break even. If you do it too prematurely you will cost yourself more money in the long run in my opinion (assuming you have a profitable strategy to begin with of course).
  3. cover some of your position (50%) for the profit you normally would, then hold the remaining portion at your original stop? Placing a stop at breakeven is trading your P&L rather than the real points of interest for price.

  4. when i compare my strats results with and without the be+1 at some arbitrary value, it hurts profits, so i don't use it.
  5. What has an analysis of your past trades revealed on this topic?
  6. correct. Polls for this kind of thing have minimal value compared to an actual analysis of the effect. There are many variables and trading styles. Even an overwhelming answer in the poll might be useless.
  7. You should, as others have said, use your past trades as your guide. If you are afraid to take even a small loss on a trade you should consider that you may be overtrading your account.

    When you trade at a size that fits your capital it allows you to trade whatever market and conditions you see rather than trade your expectations or emotions. If neccessary trade fewer contracts, fewer trades and, if neccessary, step down to minis.

    Use your apprehension as to stop placement to examine your sizing and capital management. Whenever you are uncomfortable enough to adapt your strategy to ANYTHING other than market action you need to figure out the cause of that discomfort.

    Trade the specific market conditions you encounter and be ruthless about cutting everything else out of the process.
  8. No breakEven and no take profit, just a following stop(exit) based on average true range when trending market. TP, BE, and tight step stop when scalping ranging market because,in a too noisy chart, your trade is based on P/L. In this case BE is a savior, cos you pull the trigger, you lock at BE and forget the trades. One of it statistically will cath the big move wipping your small losses and make the main profit of the day. Balance all this with your money management. But i never trade anything than forex.
  9. fxintruder ...

    I'm always curious as to whether FOREX traders are concerned with counterparty risk. Obviously some of the major names have solid balance sheets but many don't.

    I, for one, take great comfort in having a clearing house guarantee futures trades.
  10. Nattdog


    One is best off making buy sell decisions based on forward expectation, not where one entered the trade. The laugh is that so often when traders use this strategy, if they were -not- already in the trade, rather than stopping out they would be entering! ie, buy the retracement.
    #10     Mar 21, 2008