The Break Even Stop is a Psychological Crutch for Newbies

Do you use break even stops?

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Buy1Sell2 said:
The break even stop is a psychological crutch employed by newbies and sub-par traders in order to not lose money and feel good about themselves, but is actually more effective in keeping the trader from realizing extended gains. The trader who is using the break even stop is playing to not lose instead of playing to win. The break even stop rarely has any basis in fact with regard to market activity or support and resistance levels. The market doesn't care where your break even stop is. The market doesn't know or care what your account size is and whether or not you are wildly overextended. Suggestion: Abandon the use of this worthless and ineffectual tactic and set your stop according to market levels, using correct position size for your account. Get right.
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Actually, if I had to say what an "edge" was, it have to be "Breakeven plus one Tick" was my edge. I designed a method and now all my methods to have very low losing percentages based on weekly stats, so in any given week I will have 40-55% of my trades become "Breakeven plus one Tick", given that I have low losing percentages I average down on each trade and each market, I scalp and very seldom have trades last longer than four minutes.

Low losing percentages have absolutely nothing to do with psychological aspects, has to do with stats, system doesn't go for extended gains which is often becoming a myth than reality, simply don't see many traders who go for longer day trading profits of more than few years, at least I have never found a trader who been trading ten years plus.

All the years I lost, I used trailing stops, use no stops and you be concentrating much more. Trailing stops only good for me when I am reversing.
 
Handle123 said:
Actually, if I had to say what an "edge" was, it have to be "Breakeven plus one Tick" was my edge. I designed a method and now all my methods to have very low losing percentages based on weekly stats, so in any given week I will have 40-55% of my trades become "Breakeven plus one Tick", given that I have low losing percentages I average down on each trade and each market, I scalp and very seldom have trades last longer than four minutes.

Low losing percentages have absolutely nothing to do with psychological aspects, has to do with stats, system doesn't go for extended gains which is often becoming a myth than reality, simply don't see many traders who go for longer day trading profits of more than few years, at least I have never found a trader who been trading ten years plus.

All the years I lost, I used trailing stops, use no stops and you be concentrating much more. Trailing stops only good for me when I am reversing.
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An interesting post and glad you can make it work for you. Can you share your performance stats? do you have a stop? I like the sound of strategies where you earn say 1 tick with a 99% hit rate and when you lose you lose 50 ticks.
 
Good thread

I'll add opportunity cost. The opportunity cost of setting stops to break even after a trade shows a small profit is getting stopped out of a small number of trades that go on to be large winners (if u can manage trades right and let winners run...)

The opportunity cost of maintaining the original stop loss is forgoing a number of breakeven trades that go on to incur small losses.

In one case, more small losses are incurred but more big wins are gained.

In the other case, less small losses are incurred but less big wins are gained.

The way I trade it pays to take a small amount of heat on the trade. But how much? Two percent maybe. But three? Take a string of three percent losers and it really hurts.
 
londonkid said:
An interesting post and glad you can make it work for you. Can you share your performance stats? do you have a stop? I like the sound of strategies where you earn say 1 tick with a 99% hit rate and when you lose you lose 50 ticks.
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You generally need 3 ticks to make 1, so it still wont profit, without a clever entry strategy.

And taking a 50 loss would be sole destroying, 2 days of trading wioed out.

And so mind numbingly boring you'd go insane pretty quickly.
 
achilles28 said:
Good thread

I'll add opportunity cost. The opportunity cost of setting stops to break even after a trade shows a small profit is getting stopped out of a small number of trades that go on to be large winners (if u can manage trades right and let winners run...)

The opportunity cost of maintaining the original stop loss is forgoing a number of breakeven trades that go on to incur small losses.

In one case, more small losses are incurred but more big wins are gained.

In the other case, less small losses are incurred but less big wins are gained.

The way I trade it pays to take a small amount of heat on the trade. But how much? Two percent maybe. But three? Take a string of three percent losers and it really hurts.
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It is a Catch 22 that you need to solve, stops decrease performance but stops are required for capital preservation, which is imperative. What do you do?
 
Imo one shouldn't move to break even until the trade clears and holds the next level above or below your entry. If the trade is valid there's little reason (aside from news/other lameness) that price is going to rip back through multiple levels and take you out. Of course the levels you care about are timeframe dependent and the closer one is to the middle of a range the higher risk of bullshit.

Traders excessively make use of BE stops because they're scared of loss and want certainty. Those things must be killed from the mind however hard they are.
 
Autodidact said:
It is a Catch 22 that you need to solve, stops decrease performance but stops are required for capital preservation, which is imperative.
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Agreed. The thread is about the break-even stop though, not stops in general.
 
Turveyd said:
You generally need 3 ticks to make 1, so it still wont profit, without a clever entry strategy.

And taking a 50 loss would be sole destroying, 2 days of trading wioed out.

And so mind numbingly boring you'd go insane pretty quickly.
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SPOT ON POSTING!
 
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