Moving Stop Up to Breakeven: Helpful or Harmful?

[Lucrum]

I wish I could remember the web site I saw it on. Someone did a fairly detailed study on this subject. Obviously the study considered THEIR methodology. The results, as I recall, suggested it's best to move the stop to BE so long as your NOT moving too soon. Of course what "too soon" is depends on individual time frames and methods.

IF price seems to be trending I'll use a trailing stop. My % win declines but overall
PnL improves.

 

[Mike21]

Quote from allenhobbs:

Here's my take on this topic.

There is not right or wrong. All trader's SHOULD have a set of rules with directs their trade management and only tweak those rules if the market conditions change. It's easy to look in HINDSIGHT and say this trade was a huge runner, that one was a killer (thank God for my stop) and so on.

Before the recent upheaval and huge top to bottom swings, the ES in particualr was a fairly range bound market and getting a +10 net change was not the norm. Okay.

Personally, I think entires are infinitely more important than exits, especially in high volatility like we've recently witnessed. My method is pretty accurate and I don't often face the prospects of a quick stopout, so the challenge is where to take the profit before it evaporates. Also, I feel like a moron for letting a winner turn into a loser. Remember, this is real money here, not some video game. Also, I am extremely skeptical of those traders who profess to now where the market is going, so they can exit their trade at some forecasted level many many points away from their entry. Some pros believe that every trade is a scalp unless proven otherwise, thus they get to breakeven quickly and then manage the trade for profit.

Have you ever watched a skilled--or at least lucky--gambler on a hot craps or black jack table? He will always take back chips to break even or a small profit before pressing his bets to play with house money. Why? Fortune and lady luck can go away at anytime and the GOAL is to take the casino's money, not to see if this shooter can hold the dice for 30 minutes. It's called money managment. Ultra important in a negative expectancy game.

Which gets me to the point I missed because I rambled a bit. This business is all about MAKING MONEY, period. You don't need to hit triples and home runs to make a great living--singles and a few doubles will be fine. With proper money management and capturing only 2 ES points a day, you will earn a lot more than 90% of Americans if you work your way up to a reasonable size such as 8 contracts.

Have a plan and rules. Obey that plan. Trade it every single day and watch your acount grow. Good luck to all.

 

[erlewine]

Quote from austinp:

Most trades are overanxious to get in a trade to begin with. But once they're in, something mystical happens. Suddenly they cannot wait to get out. What was once anxiety to enter is now anxiety to exit. Fear of loss = greed manifested on both ends.

Thanks for bringing this up Austin; I've (sub)consciously fought this behavior for years - often planning a great entry at a critical chart level, practically begging for the market to come down and fill me for a shot at 10,20+ handles. Then you get the report, and you're immediately looking for a way to extricate yourself because "you know" the first small rally should be faded, they will whip the low and let you re-buy cheaper, etc...

Invariably we are our own worst enemy. For me, the proof comes overnight, where I'll often leave resting limits to fade overnight moves in various markets w/no target. More times than you would expect, I'll wake up to a massive unrealized gain with minimal transaction costs and no stress - I was sleeping.

Further, if you look at a chart snapshot at the point where I'm filled, it looks like a "strong" move with lots of fib retracements and support levels that would make good covers which I would surely take had I been up. Well guess what, by the time I wake, it's come crashing through all of them creating a disgusting looking reversal.

The same trades, of course, exist in the day session, but that's when I'm available to interfere with them. Bottom line, the 3:1 (or better) opportunities exist on a daytrade timeframe in all markets, and it's amazing how we constantly cheat ourselves out of them by scaling, overtrading, churning, and making the middlemen rich. It's not impossible to trade 1:1 of course, but there are far more efficient ways to make a buck.

 

[megabucks]

why not just move a small portion of your lot to breakeven but keep your original stop/exit ? that way if your reason for being in the trade (pattern/trend) breaks down it will reduce your exposure but no kill the trade

 

[sumosam]

All I know is that the longer time frame i use, the easier it is to stay in the trade. i used to do intraday/swing trades. I found that had I applied a longer time frame, I would have done much better, with less work, and stress.

In a volatile environment, this is a bit trickier. The more experienced I become, I find that its better to use technicals to take me out of a trade....but if I'm way up, I/ve learnt to lock in far enough away that I won't be stopped out, and above my b/e.

 

[HolyGrail]

Quote from Mike21:

The best thing that happened to my trading was when I STOPPED moving my stops to break even.

Manage the trade before you enter. Set your stops and limits and let nature take its course. If you try to manage the trade once you're in it, you'll just scew it up. Spend the time looking for the next trade.

Some times a winner will turn into a looser, but.... oh well. In the long run you'll be better off.

Just my opinion

~Mike

I have had the exact same experience.