what's the difference between breakeven stop and profit target stop?

Discussion in 'Technical Analysis' started by yoyo2000, Apr 28, 2004.

  1. yoyo2000


    i found some description about them,as below:
    1.profit target exit:Installs a profit target at the specified TargetLevel. Open Positions will be automatically closed if total Position profit reaches the target level.

    2.breakeven stop:Installs an automatic breakeven stop once the Position reaches the specified Trigger profit level on a closing basis.

    when i set a specific profit level as high as profit target exit,and i don't understand the word "closing basis",it it mean on the basis of close price,or close position? hwo can i set a stop when the position is close?

    any help would be much appreciate.
  2. It sounds as though you are using tradestation. Correct me if I'm wrong.

    Your profit target is the amount you think you can get out of the trade, while your B/E stop is the amount the trade has to go in your favour before the program bumps your stop up to your entry price.

    Let's look at an example. In the example we can use both a share or position basis to calculate, but lets look at a per share basis.

    Example: I buy XYZ at $10. My stop loss point is at $9. My profit target is at $13. Now imagine my stock went all the way up to $12.99 and then dropped to $9. I'd feel pretty foolish not having taken a profit and I'd feel even worse if I took a loss. The B/E stop raises your stop to break even after the stock has moved in your favour to some degree. In this case, say I set the B/E stop to $11.

    So, I buy the stock at $10, it goes up to $12.99, and as it passes the $11 mark my stop loss is raised up to $10. Then when the trade goes against me I am exited at break even (+slippage & commission).

    A closing basis probably refers to the bar the the orders are being executed on. If you are trading on daily bars then the stock would have to close above $11 in the example above for your stop to be set at the breakeven point.
    Does this help?
  3. Well, since, apparently you are also a Tradestation user, I hereby repost a post which I entered in tne Tradestation support forum, but never got an answer on it. Maybe there is a tradestation guru here who can explain the _Stops_Trailing strategy in Tradestation. Here is my original post.

    " I still have questions, specifically around the parameters BreakevenFloorAmt (which I will call BEFA) and PctTrailingFloortAmt (which I will call PTFA) and PctTrailingPct (PTPT) .

    First let's look at BEFA. If I understand it well from the manual, this works as follows: I set ShareOrPosition to 2 so I'm working on Position size. Suppose I enter on a 50$ stock and I set the BEFA to 100 ($). Poistion size 100 shares. This means that when my open P/L gets to 100$ a stop market order for the total position is generated at 50$. Is that correct? Will it be exctactly 50 or will it take into account commission ans slippage on my entry? So actually generating a stop at 50.something?

    Now PTFA and PTPT. If I set PTFA to let's say 150 ($), and PTPT to 10 (%) then, as soon as my open P/L gets to 150 (1.50$ profit a share) a stop market sell order is generated for a price at 51.50 (the current price) - 10%=
    46.35. Is that correct?

    Now what happens next? Price ticks up 1 cent. to 51.51. My P/L goes up. Does the previous stop get cancelled and a new higher one generated? Does that happen for EVERY instance that my P/L goes up? Or does it go by some incremental value?

    So far, I understand if I use these parameters individually.
    And now comes the tricky part. How do these 2 parameters interact? (PTFA and BEFA). Let's take the example described above.

    First my BEFA order at 50 gets generated. Then comes my PTFA order. I suppose that this will cancel my previous BEFA order. And if you look at the figures, it would mean that my stop at 50 will be replaced by a stop at 46.35, so actually getting out at a loss. Is this what happens? or will a stop only replace a previous stop when it is higher?

    I have ran several optimisation strategies and sometimes I get interesting results with the PTFA set LOWER than the BEFA . This doesn't make sense to me.
    Example: PTFA to 50 and BEFA to 100 (on position size).
    Now my PTFA order will kick in first and trail up , till I get to 100$ profit. What will happen then? Will the BEFA order get triggered , canceling my trailing stop and setting it back to a breakeven point? Shouldn't the BEFA BEFA amount be ALWAYS less then PTFA (-PTPT). Example:
    I set BEFA to 50. And I will be prepared to give back 10% on my trailing (PTPT=10). Shouldn't my PTFA be set to AT LEAST 55 (50+10%x50)?

    Or should these two parameters just simply not be used in combination? Thanks for any clarification...."

  4. yoyo2000


    thanks Lightningsmurf,i get something from ur words,and sorry to reply so late.

    from ur words, when i buy at $10, and when it move to,for example,$12.3,in order to make me do not lost money,i move my stop level up to $11,and several days later,the price move up to $13,so i level up the stop to $11.8.
    in this case,i don't think there is any difference between B/E stop and trailing stop,or,should i think that the stop in the first moving is B/E stop,in the second moving,the same stop become a trailing stop?
  5. yoyo2000


    and,sorry flyingdutch,i use Wealth lab instead of trade station,so i couldn't effort any technical help about trade station.
  6. OnGoing


    No, the breakeven stop stands still. The trailing stop moves up with price to lock in more of the growing profit.

  7. zepplin


    this is something I use everyday. I basically box the trade. Essentially I figure my max loss that I am willing to take on a trade - that is my stop-loss. I then figure at what profit level I want the trailing stop to kick in. I also figure where I want to exit on this trade and that is where the stop/profit goes.

    Example: Enter at $10.00 Stop Loss at $8.00, start the trailing stop once we hit $11.00, and that trail will be $1.50 from the the current high (low if short). Profit target is $15.00.

    This is of course a simplistic structure as often times I will take half the position off at +1.50 and then half of the balance at +2.0 and then let the rest run as the trail by then will be at +1.50 or at least a profit of 0.50. Basically the last 1/4 of the trade becomes risk free and I will allow it run as far as it will go.

    Just a little variance on the break even, trail and stop loss combination.


  8. ============

    Prefer trailing stop name which will profit
    to profit target stop unless you are trading short term.

    Actually never did believe in an inaccurate name like breakeven stop mentioned in trading books;
    WHY would anyone want to only plan to ''break even ''especially since you have power bill, business expenses- its not really breaking even.?????????????

    May help to take trailing profits ;
    cut losses & keep it simple.
  9. yoyo2000


    OnGoing,i think,maybe the breakeven stop is the same as a limit order in ur words?

    hehe,zepplin,my structure is the same as yours,and i don't care the different between those stops too much,but after i read some book,i got some puzzle--every one have a specific name for his stop settings,so i want to make it clear:)

    murray t turtle,there r even much more strange stop,such as 'reversed breakeven stop',but i don't want to waste time on it,hehe,and i believe the words:KISS&Cut Loss Let Profit Run:)