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Query: Moving Stops to Breakeven 89 replies

Moving stops to BE

  • #21
  • Oct 29, 2009 9:05pm Oct 29, 2009 9:05pm
Quoting andante9
Fine. But tell me this, are you not still limiting your trade potential by using a timed stop? ie. since you decided not to use a profit target like a given pip amount to increase profit potential what is the difference if you use an end of day stop (the price could still keep on going in your direction!).
You sure are limiting your trade potential at any given point when you decide to close the trade... that's something we can't really control. That's why it really depends on how you like to trade.
The main reason i choose the timed exits is because I like to let the trade run without the need to be guessing on where the right exit should be. I see it not on the being right but on taking what the market gives me at that particular time.
  • #22
  • Oct 29, 2009 9:24pm Oct 29, 2009 9:24pm
Ok. I'll see that and raise you. . .

Why not use a trailing stop to 'let the market decide what it want to give you'?

Let's say on day one the market goes 100pips in your favour. If your TP is 100pips your rockin for sure. . . but your out.

Next day the market goes ANOTHER 100pips in your favour. Well now if you had a solid TP of 100pips OR if you had a timed exit of 1 day you will miss out! But now you could be up more than double your original target!

Next day the market goes Another 100 or maybe even 200 or more pips in your favour. . If you were trailing the market by 100pips (just for example) or maybe trailing the market by swing lows or highs, you might just capture much more of the market.

I am open to debate. . .
  • #23
  • Oct 29, 2009 9:31pm Oct 29, 2009 9:31pm
As you can see, the market can be traded in many different ways. What may seem to work for us may not be profitable for the next trader... there is no right or wrong answer.
  • #24
  • Oct 29, 2009 10:25pm Oct 29, 2009 10:25pm
I agree and I am glad you have found what works for you!

Just looking for healthy debate.
  • #25
  • Oct 30, 2009 3:29am Oct 30, 2009 3:29am
Quoting Dopey
If you move your stops to BE too quickly, you're trading to NOT LOSE, instead of trading to win.

Just thought I'd pass that on.
Some would say that trading to NOT LOSE is the way to go.... but that said, I'd certainly acknowledge that moving my stop to breakeven too soon has been one of my biggest weaknesses as a trader. Taking the MAX trading course last month has helped immeasurably in this regard.
  • #26
  • Oct 30, 2009 3:52am Oct 30, 2009 3:52am
Quoting auxesis
Everyone is hardwired a little different, finding your optimal trading level is key, that helps keep the emotions in check, stepping outside your comfort zone can cause a flood of emotional stimulus which is normally bad for trading. It does not matter what size your account is, if you feel undue stress trading 1 lot, then drop down to mini's or micro's and slowly work up increasing your risk appetite.

Find that MM, size level, that works profitably for you and then analyze your weaknesses and work to slowly correct them, like that frog in the...
Yes, I am trading big (never more than 2%) but for my account that is actually a lot. And hopefully it will become more
I could never trade that amount without statistical results...
  • #27
  • Oct 30, 2009 4:33am Oct 30, 2009 4:33am
Interesting points of view stated here. Notice I wrote "too quickly" in my statement. I believe at some point you should go to BE, just in case, but it's judging that moment which is crucial.

I brought this up because I'm very good at not losing. However, a review of my trades reveals that I've been taken out too many times by being too quick to move my stop to BE and I've failed to re-enter in the original direction.

Many systems are basically breakout systems and it's important to remember that price likes to come back to test the level it just broke from. Once another significant level has been reached and/or breached, then it's time to move to BE, but not before.
  • #28
  • Oct 30, 2009 5:06am Oct 30, 2009 5:06am
It's a bit of a dichotomy, this stop business. The original placement is obviously crucial and guides one's initial risk per trade in terms of lots traded.

I am gradually coming to the conclusion that time has to become a factor in how one manages the trade from the point of entry. I'm starting to see that part of the art of successful trading is not just having a clear cut way of entering a trade, and a set target for exit, but how you deal with those situations where price doesn't make a clear and decisive move in the anticipated direction.

Historically, I've tended to set my stop and wait for it to be hit or for price to reach my target (or close enough not to matter). I normally trail by locating the next area of S/R that I can hide behind.

The hardest decision for me is to accept that price -ie the market - hasn't made it's mind up that this time I'm right and that, maybe, I should move my original stop in a bit closer and therefore reduce my risk from 1% to .5% or .75%. This still leaves some wriggle room for price to confirm my trade or, in the event that I'm wrong, take me out at a reduced loss.

We read all the time that the entry is key or that the exit is key but this pre-supposes that we only have winning trades. I feel we could take this discussion into the area of damage limitation for potentially losing trades.

I'm going to experiment a little on basing my original stop position to be be reduced by 10% for every 4-hourly bar that closes after entry where price hasn't made a sufficiently () strong enough move to confirm the market's direction. This will be irrespective of whether I'm in profit or drawdown. To make this clearer let's assume a 100-pip stop. If after the close of the 2nd 4-hour bar after entry the market is still in consolidation I would reduce my stop by 10 pips and so on....

Any thoughts on this would be interesting, so let's hear what others do.
  • #29
  • Oct 30, 2009 6:07am Oct 30, 2009 6:07am
BE is a psychological, as opposed to a technical, or statistical, threshold. Unless there is technical justification behind any trade management strategy, it adds no real edge.

Moving SL to BE more quickly will improve your win%, but not necessarily your annual bottom line (if a large enough number of trades that get stopped out at BE would have gone on to be big winners).

Moving SL from (say) -15 to -10, from -5 to BE, or from +10 to +15 all lock in 5 pips of profit, and will therefore have an identical effect on eventual bottom line, even if the psychological effect of each is different.
  • #30
  • Oct 30, 2009 6:18am Oct 30, 2009 6:18am
Quoting Dopey
I believe at some point you should go to BE, just in case, but it's judging that moment which is crucial.

it's important to remember that price likes to come back to test the level it just broke from. Once another significant level has been reached and/or breached, then it's time to move to BE, but not before.
+1
  • #31
  • Oct 30, 2009 6:38am Oct 30, 2009 6:38am
Quoting Dopey
Interesting points of view stated here....

I think proper stops and style of money management is something that can only be addressed by reviewing ones trades, and how it progresses statistically.. Do you have a high win percentage, or high R:R, or very low percentage but a much higher R:R. All those are factors that determine how and what kind of money management is going to be suitable for ones trading system/style.

For example, if you have a high rate of hitting 20 pips per trade, and out of that a fair number ends up targeting 80-100 pips, then it makes sense on trading with your full alotted risk till 20 pips, and take profit. But on retraces or breakouts of that number add incremental lots as long as position is going your way. Now its easier said than done, but I'v noticed that the more I can employ this, my losing trades are less in amount and my winning trades are for more in amount, and thats because of not scaling out my position for runners. Because in systems where you take partial profits, in case of a loss, your loss is in full lots, but your wins are in lots whose exposure is reduced more it goes your way. I think the opposite of that would help most trading systems/style.

Now the exact number that should be risked or when's a good time to add lots or on what retraces or breakouts is a good idea to add positions, thats a matter of price action and individual trading style.. But for my trading style, it has helped the bottom line immensely.
  • #32
  • Oct 30, 2009 6:43am Oct 30, 2009 6:43am
Personally I address my trading first and foremost from a risk management viewpoint - everything else is subsequent to this criteria.

I too have been, am, and will likely be guilty of moving the stops to B/E too soon on trades that then go on to my target area - however I'd like to quote Phillip Nell whom I believe sums it up perfectly.

"I'd rather be "out" of a trade and wishing I was "in" than "in" a trade and wishing I was "out"
Nihil inimicus quam sibi ipse Marcus Tullius Cicero
  • #33
  • Oct 30, 2009 8:33am Oct 30, 2009 8:33am
Quoting coscorp
"I'd rather be "out" of a trade and wishing I was "in" than "in" a trade and wishing I was "out"
Great quote, coscorp.

Inserted Code
[i][size=2]Dopey : [/size][size=2]Interesting points of view stated here. Notice I wrote "too quickly" in my statement. I believe at some point you should go to BE, just in case, but it's judging that moment which is crucial. [/size][/i]
 
[size=2][i]I brought this up because I'm very good at not losing. However, a review of my trades reveals that I've been taken out too many times by being too quick to move my stop to BE and I've failed to re-enter in the original direction.[/i][/size]
 
[size=2][i]Many systems are basically breakout systems and it's important to remember that price likes to come back to test the level it just broke from. Once another significant level has been reached and/or breached, then it's time to move to BE, but not before.[/i][/size]

Being unwilling to re-enter - especially at a worse price -after being stopped out at B/E is another of my main trading weaknesses.

I have spent and continue to spend a lot of time trying to enter on pullbacks rather than breakouts - my personal Holy Grail is to enter at the 3 point of a 123 setup. It can be done, but I do not yet do it consistently.
  • #34
  • Oct 30, 2009 4:58pm Oct 30, 2009 4:58pm
Quoting coscorp
"I'd rather be "out" of a trade and wishing I was "in" than "in" a trade and wishing I was "out"
Psychologically, yes. That is human nature.

In terms of bottom line, it depends on how one chooses to view "potential vs actual". It could reasonably be argued that a missed 20 pip opportunity has the same effect on annual P/L as a trading loss of 20 pips. In both cases, P/L could have been 20 pips better, if only I had.......

At the end of the day, the best that any trader can do is take the setups that his approach deems to be valid, and then manage risk as best as he knows how, come what may. IMHO that represents "flawless execution", and is the only possible goal. Wishing whether he is in or out serves no tangible purpose.

But each to his own way of thinking.
  • #35
  • Oct 30, 2009 5:09pm Oct 30, 2009 5:09pm
Quoting coscorp
"I'd rather be "out" of a trade and wishing I was "in" than "in" a trade and wishing I was "out"
Depends on what your being "in" has done to your account. Personally, I find those trades I am out of and should be in a lot more haunting than staring at some negative numbers. This is a business of semi-gambling (or pure gambling depending on strategy) meant to make money. If you are too hasty to set a trade to BE, it then gets taken away from you on a 1% swing for the day, then four days later it is up 4% from entry, I will really be TICKED OFF. A lot madder than just taking a 1 - 1.5% loss, which may have been where my original stop was. That loss was something that I "accepted" before I made the trade, due to my belief and expectation I had for the markets movement. The assumption turned out to be true, yet I wasn't there because I didn't want to lose. I would rather not play like that.

Depending on how one trades, there is an "outlook" of what that person thinks should happen. 10 pips into the positive doesn't change anything, 1 day doesn't change a thing either. So, normally, I just let my trades run and if I lose I lose...
The market is my nation. Traders, my family. Hello, brothers and sisters!
  • #36
  • Oct 30, 2009 6:47pm Oct 30, 2009 6:47pm
Quoting jtrade
Being unwilling to re-enter - especially at a worse price -after being stopped out at B/E is another of my main trading weaknesses.
I guess I'm still at the beginning -- Unwilling to admit that, after correctly reading the overall direction, an impulsive entry may ignore that extra stretch of price where the turn actually begins, and you stopped out before you get there. Then I have to sit there with my hands away from the keyboard while the price does my entire move, because I'm too worked up about it.
It's not overmargining and was done several times. Calm and self-application upon the entry's last detail seem to be my next step.

auxesis' method (#12) is duly noted, if I can ever get there. Daytrading'd be a lot easier.
  • #37
  • Oct 30, 2009 7:18pm Oct 30, 2009 7:18pm
Quoting Dopey
If you move your stops to BE too quickly, you're trading to NOT LOSE, instead of trading to win.

Just thought I'd pass that on.
This is good advice.
  • #38
  • Oct 31, 2009 3:21am Oct 31, 2009 3:21am
Quoting StockKJay
Depends on what your being "in" has done to your account. Personally, I find those trades I am out of and should be in a lot more haunting than staring at some negative numbers. This is a business of semi-gambling (or pure gambling depending on strategy) meant to make money. If you are too hasty to set a trade to BE, it then gets taken away from you on a 1% swing for the day, then four days later it is up 4% from entry, I will really be TICKED OFF. A lot madder than just taking a 1 - 1.5% loss, which may have been where my original stop was. That...
To each his own - however, I don't regard this business as gambling, far from it. Also it may be you have to work on yourself and that part of your trading psychology if you get so upset about the trade that "got away" - though between day 1 and day 4 you could have reassessed the trade and gotten in albeit sacrificing some of the original profit. I've been there myself as well - we all have - and from where I stand there is far more harm than good to be had in such situations.

just my .02
Nihil inimicus quam sibi ipse Marcus Tullius Cicero
  • #39
  • Oct 31, 2009 11:31am Oct 31, 2009 11:31am
Quoting coscorp
however, I don't regard this business as gambling, far from it.
Just a different interpretation of the word "gambling" here. There are poker players who, I am convinced, don't actually gamble when they sit down at the table. Yet, to not diverge and attempt to distinguish between who is and who isn't... I will just declare some are crazy gambling, while others are just putting money on something they don't quite know where it will end up at (gambling). Personally, opening a small retail or service shop is far more of a gamble than I would ever see trading to be.

Quoting coscorp
Also it may be you have to work on yourself and that part of your trading psychology if you get so upset about the trade that "got away" -
With what little knowledge you have, given my post, this is a fine point to be made. The most psychologically significant element in my trading is that my competitive nature doesn't influence my trading. So, I use words like "haunted" and "ticked off", these are emotions I do allow myself to have for not doing as well as I could have. I am not going to be numb about this stuff. I take a loss with a shrug, if that, and go on. Non-winners, or simply small ones, I allow a little fire. So long as people don't do anything stupid or let it influence their trading, personally, I like to see emotions from traders. If I let myself down I am not going to allow myself from escaping criticism. I would expect criticism from a superior if I did the same at a trading firm, me being the only one who oversees what I do, I have to be honest and tell it as is... "You made a mistake, stupid!"

Quoting coscorp
between day 1 and day 4 you could have reassessed the trade and gotten in albeit sacrificing some of the original profit.
Well, not with my discipline or method, regardless, another fair point.

Quoting coscorp
from where I stand there is far more harm than good to be had in such situations.
I will be honest, I didn't really consider different approaches while making my reply. Nor did I wish to sound critical, if I did I apologize. This is where the difference comes from more than likely. Since "figuring" this stuff out, I have made all my significant earnings on major reversals in the markets. Thus, I look for high reward with low risk. Mid '07, early '08, early '09. So... given the amount of time I wait, given my expectations... exiting early, due to the topic (moving stop to BE) can get a bit
The market is my nation. Traders, my family. Hello, brothers and sisters!
  • #40
  • Last Post: Oct 31, 2009 12:21pm Oct 31, 2009 12:21pm
Quoting PeterFM
It's a bit of a dichotomy, this stop business. The original placement is obviously crucial and guides one's initial risk per trade in terms of lots traded.

I am gradually coming to the conclusion that time has to become a factor in how one manages the trade from the point of entry. I'm starting to see that part of the art of successful trading is not just having a clear cut way of entering a trade, and a set target for exit, but how you deal with those situations where price doesn't...
Peter, I normally don't move my sls, but tried this method on Friday during NY session (only because it was Friday). Was stopped out at 30 pip profit. However, had I kept my sl at or behind entry point, profit would have been 80+ pips by the close of the day (at closing price level). I do not regret those 50 pips because things could as well have gone againt me in this time of uncertainty.

The lesson I learned are:

1. Let the price make an attempt at next reisistance/support, if it breaks it, then lock 75% - 80% of the profit (like one has entered after pa crossed over the support/reistance). Risking 20%-25% of profit for another 50%-100% is a bargain for me.

2. If one wants to scale up, nothing like moving sl of previous position to BE or BE+. It preseves margin to scale up without exposing the account to risk greater than one takes on first position.

Earlier in London session, I was taken out at 2 pip profit when pa reversed and hit my sl moved to +2 pips. But at the same time gave me few additional pips when I entered in the new direction of pa. Those additional pips came from the area between my last entry to stoploss. Had I not moved my sl, that would have been a loss.

Conclusion: If one's aim is capital preservation or scaling up or scaling up without additional risk exposure, moving sl to BE or beyond is good.
The Thief of Wall Street
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