The Break Even Stop is a Psychological Crutch for Newbies

at some point, a rules based trader needs to decide if he wants to make "Never let a profit turn into a loss" one of his rules

 

That particular rule is in and of itself ambiguous and likely unnecessary. Stops should always be based upon a combo of market noise and account size. Those factors will very rarely, land you on breakeven as a stop. --How much of a profit is allowed to be given back? Does the trader say, " once I have made 8 ticks, I cannot let this become a loss?" I believe using this thinking will keep the trader from being extraordinarily successful.

 

if you're afraid it is going to turn on you, just close it out

why wait to be stopped out at a worse price?

if you were smart enough to get into that winning trade then you are smart enough to know when it has run it's course

breakeven stop is the same as "playing with the casinos money". That's what gamblers who know they are playing a game they cannot win do. If I believe in my strategy there is no reason for me to suddenly start moving stops. They were good when I put it on, and now they are so far away they have become meaningless.

 

CORRECT

 

This is how people with perfectly good trading plans achieve consistently negative results. They cut their winners short because they're afraid it's going to turn on them at every little hesitation/retrace, but they the full stop loss get hit every time on the losers.

 

BINGO

(The word afraid was used. That's never a positive indication.)

 

I think you missed the word "afraid". If you are afraid why wait? Laugh if you want, trading until you are afraid isn't that bad of a strategy. You probably already know all you need to know about the market, but perhaps you can improve a little on how you handle, control, and evalutate, and listen to fear.

 

If you are afraid, don't trade.

If you are absolutely certain, don't trade.

If you're uncertain about where a trade thesis would be invalidated by price behavior, don't trade.

If there's a level you believe price will never get to and you're totally safe putting on a position without worrying about the risk, don't trade.

If you find the phrase "all I need to make is N dollars a day" creeping into your thoughts, don't trade.

 

there is no escape
from the fear of the unknown
only knowing fear

 

Very wise advice : knowing when not to trade, aka when not to put money at risk.