Moving Stoploss to Break Even

T

tommo

Hi all,

I was wondering if any of you employ the strategy of moving stoploss to breakeven after you have gone onside a certain number of ticks/percentage?
Do you feel this smooths your equity curve?
In my experience protecting downside is vital and i like the idea of locking in a profit or at least eliminating a loss as early as possible.

Even if it reduces the number of winners you have I imagine your equity curve is smoothed as you eliminate a lot of losses and you are playing with the markets money instead of your own when it goes for you.
 
Quote from tommo:

Hi all,

I was wondering if any of you employ the strategy of moving stoploss to breakeven after you have gone onside a certain number of ticks/percentage?
Do you feel this smooths your equity curve?
In my experience protecting downside is vital and i like the idea of locking in a profit or at least eliminating a loss as early as possible.

Even if it reduces the number of winners you have I imagine your equity curve is smoothed as you eliminate a lot of losses and you are playing with the markets money instead of your own when it goes for you.
More...

I have found that this type of practice hurts performance. The problem is you end up missing not just losers, but also lots of winners.

If you were not in the trade would you want to get in at that point (for example, some look for pullbacks) Then it makes no sense. The next trade can be the same as the current trade.
 
I agree with the last post. While it does protect you and is a defensive way to trade, it will take you out of potential winning trades. I think the most important thing after putting on your trade is to find the price/area where the trade is "wrong" and put a stop in. Then let the trade progress and do not exit until your profit goal is hit, or you are stopped out. Otherwise you will get shaken out by the noise.

If you short the sp at 1325 with a 1330 stop and the market goes down to 1323, then pops back up to 1325...or even 1328 does that mean you should exit? In my opinion no. Got to let the trade breath.

Like the guy above said, you will spin your wheels and go nowhere. After costs you'll be a scratch trader at best.
 
Thanks for the replies guys. I agree to be honest. Of all the systems I have tested generally the wider the stop and the more room a trade is given the better the system performs. Which leaves a bit of a paradox. Give your trades room to breathe but cut your losses quickly
 
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Moving stop to BE reduces your performance and in many cases makes you unprofitable.

Now that we are on the subject, all stops hurt performance, I just prefer to use other methods of risk management.

Crazy A
 
IMHO it can depend on the strategy and the market being traded.

I trade/scalp CL and look for a very specific entry and once entered I expect a hard move with very little if any hesitation...so if I am in the money 5 tics and it doesn't follow through...it usually comes back and hits my stop or worse...this is all based on my strategy mind you... I've found the B/E trades save me a lot of trouble.

I think they guys above are correct overall...but it can be used as a vital tool...different strokes for different folks etc.
 
Quote from tommo:

Hi all,

protecting downside .................

the idea of locking in a profit...............
More...


The two are not the same.

Moving stop loss is subjective to EVERY trade, In my opinion should not be a Rule.
 
Quote from tommo:

Hi all,

I was wondering if any of you employ the strategy of moving stoploss to breakeven after you have gone onside a certain number of ticks/percentage?
Do you feel this smooths your equity curve?
In my experience protecting downside is vital and i like the idea of locking in a profit or at least eliminating a loss as early as possible.

Even if it reduces the number of winners you have I imagine your equity curve is smoothed as you eliminate a lot of losses and you are playing with the markets money instead of your own when it goes for you.
More...

Moving stops to break even mechanically (like after XX% risk or whatever) doesn't make any sense, just like treating every trade as the same R:R doesn't really make any sense.
 
Quote from tommo:

Hi all,

I was wondering if any of you employ the strategy of moving stoploss to breakeven after you have gone onside a certain number of ticks/percentage?
Do you feel this smooths your equity curve?
In my experience protecting downside is vital and i like the idea of locking in a profit or at least eliminating a loss as early as possible.

Even if it reduces the number of winners you have I imagine your equity curve is smoothed as you eliminate a lot of losses and you are playing with the markets money instead of your own when it goes for you.
More...

I consider breakeven trades to be losing trades due to the cost of the trade (commissions). In contrast, I prefer to move my initial stop/loss to a profit point (trailing stop) that pays the cost of the trade if the trailing stop is hit. Yet, I usually tighten my initial stop/loss one or two times prior to moving it into a profitable trailing stop if the trade is going my way.

Yeah...it's useful "most of the time" (smooths the equity curve as you stated) but not every time. The key is to know the price action you're trading and have a good feel (it's an art) of the changing volatility to determine when to move that initial stop/loss protection into a profitable trailing stop especially if the price action develops "slowly" after your entry.

Thus, the entry is the easy part for me. The hard work starts after entry. In contrast, early in my trading career...the entry was the hard part and the trade management "after" entry was easy mainly because I thought in error to just place my initial stop/loss and then sit back...letting the stop do the work. The latter (early in my career) was very problematic until I learned that I needed to "manage and adjust my stops" as volatility was changing.

Mark
 
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