Moving Stoploss to Break Even

Quote from McBet:

Yes, but how do you monetize psychological comfort? Isn't it just the same skewness preference that causes general public to buy lottery tickets? If you observe that your bankable performance deteriorates markedly as a result of using stops (and it is not necessarily always the case BTW), then it may be necessary to withstand those losses - no pain, no gain. Just reduce size, martingale very rarely (works in indices and pairs if done in moderation), and do use time stops to eliminate perverse selection of exit prices (stops are positively evil in that respect).

More interestingly, it is possible for manually executed systems to be consistent on par with fully automated ones. Just study psychological persuasion techniques and use some of them on yourself... I found for example that commitment in writing works very well here. Having to explain in detail and apologize profusely for each and every deviation from the system, especially those dangerous self-reinforcing random... gains. So I simultaneously trade in sim or on paper and make minimizing the tracking error the main objective of my real live trading.

See Cialdini's "Influence: The Psychology of Persuasion":
https://venturethis.wordpress.com/2010/06/19/influence-part-ii-commitment-and-consistency/
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thanks for the link
 
Quote from NoDoji:

I don't think the time frame matters. Charts without the time frame displayed look the same, so wouldn't you be managing the stops/targets in the same fashion?

Per trade, my max stop is .20, my average stop is .10, my minimum profit target is .20, my average is .30 and I've captured some larger intraday swings of .50 to a little over 2.00. I don't have to work to avoid losses because the number of wins and losses on average turn out to be pretty much exactly what the statistical probabilities I calculated for my chosen setups indicated they would be, and the % of times trades reach profit targets before hitting stops also match up on average.

If I were swing trading the same instrument, based on the larger time frame chart (daily chart), it looks like my stops would be between 2.00 and 3.00, and my minimum profit target would be 5.00 with some larger swings possible of 10.00 or more.

So in the longer swing time frame my stops are significantly larger, but so are my profit targets, and in either case there would be no reason I'd move a stop farther away if price came close to it, or use a really wide stop that made no sense technically just to allow the trade to "work". I learned the painful way that moving stops or using really wide stops to "let the trade work" means price is proving your trade is no longer valid, but you still believe price is going to get to your initial profit target, and you have difficulty realizing a loss.

I swing trade stocks and I manage those trades the same way I manage my day trades.
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So where does your stop end up after 1R? Does PA take you near B/E or is it all or nothing? If you adjust it based on price action, I think you should mention that.

Otherwise it sounds like your stop is left where it began throughout the whole trade. I'm assuming it isn't?

You guys can post your live trades and i'll post mine. We can put this to rest for good but i can assure you we have much different strategies.
 
Quote from athlonmank8:

So where does your stop end up after 1R? Does PA take you near B/E or is it all or nothing? If you adjust it based on price action, I think you should mention that.

Otherwise it sounds like your stop is left where it began throughout the whole trade. I'm assuming it isn't?

You guys can post your live trades and i'll post mine. We can put this to rest for good but i can assure you we have much different strategies.
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At 1R, PA normally takes me to b/e. I've had some trades move beyond 1R, run all the way back to stop me out b/e by just a few ticks and start back my way again, but I've gotten very good at jumping right back in when that happens.
 
Quote from NoDoji:

At 1R, PA normally takes me to b/e. I've had some trades move beyond 1R, run all the way back to stop me out b/e by just a few ticks and start back my way again, but I've gotten very good at jumping right back in when that happens.
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Quite the important mention.

Having the mental fortitude to take this second attempt takes a while to master even as it's much easier to get the cheese as a second attempt.

Crazy A
 
Quote from rolando87:

I fully agree that moving a stop to breakeven after you have some profit does not make sense since your initial stop loss is the place where you deem the trade to be invalid, and past the support zone, why not leave it there? whereas your original entry point is that place where you thought there was a good support (if long play) area.

The only problem i have is that sometimes i scale in multiple times and i find my position is so much larger now that exiting at my original stop loss area would create too large a loss and would invert my R:R ratio.

Its only then that I may exit out at breakeven because my breakeven area my be in the middle of a range, thus i say screw it because getting stopped out below support would cost me too much. The other possibility and probably the smarter thing to do is to scale out at the same places I scaled in at, but for some reason i rarely do this.

Anyone have any suggestions on how to handle your risk when you scale in instead? I tend to do this a lot, as i believe the more in your direction it goes, the most "right" you are therefore i believe its ok to put a larger then average position.
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Rolando, in response to your first paragraph, I agree completely. The initial stop loss is the place you deem the trade to be invalid, so it's not reasonable to move it arbitrarily just because the price moved some. Well put, and very logical.

In response to your last paragraph about handling risk when you scale in, I use a system called Pyramiding, which is similar, I think. I just treat each addition to my position as a new entry with a new stop. This means each addition has to have its own logical entry point not based on the original entry. As a hypothetical, let's say the original entry gets a 2% risk (based on account size), and the position goes 10% in my favor (trading options). I don't add to until the next logical entry point at which point my original is up 10% and my next position (or addition) has its own risk. If I'm wrong, both the original and the pyramid attempt are closed at the 2nd stop limit (based on the pyramid attempt). The original would win 8% and the pyramid would lose 2% for a total 6% account growth. If I'm right, they both win together. I follow the same procedure for every additional pyramid until my full account plus margin is in use. I've only been "all in" a few times and February 2009 is one of them. Take a look. In the attached picture, number 1 is my original stop limit after the entry (put options), numbers 2, 5, and 7 are stop limits for additional pyramid opportunities, and 8 is where I got stopped out of everything.

And for the original post, about how to move to break even, numbers 1-3 explain my technique for getting to a break even without risking being stopped out. The logic that determined my risk limit is the same logic that gets me to break even.
 

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Under the testing I've done, moving stop to BreakEven minimizes some losses but also prevents you from obtaining some winners.

The end result was that it hinders the expectancy curve.
 
I have a script that runs while I'm trading. It has what I call Intelligent Exiting, it's some TA that detects when the trade is faltering. Actually it detects when price is setting up for another entry and it exits the current trade and waits for the next entry... it just quits while it's ahead. This turns lots of trades that would have hit the stop into small winners and avoids the lost opportunity that occurs while waiting for a trade to hit the stop... it's almost like the old idea of how long to hold a stock: "Hold it until you wouldn't buy it anymore"
 
Yes, for my trading its very important to move stop to break even. I feel better with it. And trading should feel good.

Because if the market reach a certain level i dont want to be able to get a loss anymore.
If i be stopped out, i dont care. Thats just one of the next 10 Trades where i will be not stopped out. And i go on to the next trade.
There are Setups to trade every day every week everywhere.

The question is just at which price level do you move the stop to Entry (a little bit over entry for the cost of commissions) and have the best probability to make the profit you want.

Number 1 rule is to minimize Loss.
1. Take out the risk.
2. Let it go.

If you cant loose anything anymore its a better trade, then there isnt any stress factor anymore.

Of course i can only talk about myself. It depends on your strategy.
I am a 100% technical trader and i am just want a straight direct move after i got in to the market, depending on the time frame i trade. If i dont get the "perfect" move i cut down my position and minimize the risk.

So how cares if i missed a profit when i cant loose anything.
The next time its a winner.
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Little statistic

break even strategy

10 Trades
2 Trades stopped out at break even = no loss
1 Trade = looser
7 Trades = good Winners

VS

no break even strategy

10 Trades
3 Trades = loosers
7 Trades = good winner

So what is better. you decide.


Greetings,

HATEtheRisk
 
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