Moving SL to BE is very wrong/noobish | Forex Factory

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Moving SL to BE is very wrong/noobish

  • #1
  • First Post: Jun 25, 2010 5:02pm Jun 25, 2010 5:02pm
I am by no mean a pro trader or something. But I am very good in math and statistics because of my electrical engineering career.

Anyway I will explain to you why moving SL to BE is very bad and noobish in few simple words w/o using complex math.

1-You open two lots , with both TP 30 pips. One hit TP , the other you move SL to BE. The 2nd lot hit BE , no problem , you still got your 30 pips , right? WRONG!

Thats what you did : You had +60 pips in your equity for the 2 lots , when you moved SL to BE for 1 lot, it ONLY means you opened a random new trade with -30 SL , when it hits the SL at BE , you lose 30 pips from YOUR money!!

2- Moving SL to BE = opening a random trade , a trader that moved SL to BE in an EU trade is the same as a trader who is opening a random order in EU trade with SL = -30 pips.

3-When you open 2 lots and both hit SL , any new trade BOTH 2 lots must hit TP in order to be profitable , moving SL to BE can decrease your winning % drastically.

4- Have you ever seen someone moves TP to BE when he is -15 pips ?? It makes the same sense , or even a better approach!! Because 1 trade can hit BE and the other hit the -30 pips SL and you lose -30 pips instead of -60!!. So moving SL to BE is only an emotional product where you like to feel safe. While the truth that this puts you in real danger.

5-Why do you move SL to BE ? Why not +10 pips or +20 or more? Because you want to give the trade more room , right?? Guess what , keeping the old SL will give the trade MORE room and you have more chance hit your TP!!


6-You are going out , or going to sleep...etc, Then instead of moving SL to BE , close your +30 pips and enter another trade in a retractment or even another pair with -30 SL! The exact same thing.


Conclusion

Moving SL to BE will decrease your winning % . If you do your homework and studied your system and confident about % of hitting TP , never move SL to BE.
  • #2
  • Jun 25, 2010 5:40pm Jun 25, 2010 5:40pm
Quoting Brb-Fraudin
Thats what you did : You had +60 pips in your equity for the 2 lots , when you moved SL to BE for 1 lot, it ONLY means you opened a random new trade with -30 SL , when it hits the SL at BE , you lose 30 pips from YOUR money!!
Uhm, no. That's not the way it works. When you move an SL to BE, you aren't opening up a new trade. You're adjusting the SL of the current trade. The analogy of opening up a new trade, hence losing pips, is incorrect.

What it does, however, is mess with your risk/return rate. In a random market, that means losing money. But that's a bad assumption.

Closing half your trade, on the other hand, can be seen as opening a new opposite trade. Hence the argument behind closing w/ an edge.

Quoting Brb-Fraudin
2- Moving SL to BE = opening a random trade , a trader that moved SL to BE in an EU trade is the same as a trader who is opening a random order in EU trade with SL = -30 pips.
Uhm, no. You're forgetting that the trader at BE would be profitable. Your two comparison trades may have the same SL, but the entry price is different. That's where the analogy breaks down.

Quoting Brb-Fraudin
3-When you open 2 lots and both hit SL , any new trade BOTH 2 lots must hit TP in order to be profitable , moving SL to BE can decrease your winning % drastically.
Not technically, at least not for any given trade. Granted, moving to BE might increase your odds of stopping out, in which case your long term risk ratio gets screwed up, but you can certainly be profitable on a single given set of trades by closing half and moving the rest to BE.

Quoting Brb-Fraudin
Moving SL to BE will decrease your winning % . If you do your homework and studied your system and confident about % of hitting TP , never move SL to BE.
Moving to SL *MIGHT* decrease your net return. It will have no affect on your winning %. It might actually increase your winning %, altho those wins will be smaller.
  • #3
  • Edited 6:14pm Jun 25, 2010 6:12pm | Edited 6:14pm
There are some good ideas in these posts,

Perhaps a moderator could combine this thread with this one?

Moving Stop to B/E (Break Even) Discussion

To keep information in one area.

Just an idea.
X
XAU-XAG/USD_Gold n Silver Trader's Thread = Technicals, Fundamentals & News
  • #4
  • Jun 25, 2010 6:18pm Jun 25, 2010 6:18pm
Adjusting to BE is good trading. I do think many traders get it wrong by moving to BE too soon but overall it's good practice in not letting your winners turn into losers.

My method of adjusting to BE, is to allow my strategy to locking 40-50 pips before moving to break even. of course this rule is subject to change based on the market. More than likely, adjusting trade to BE after 50 pips has been locked in will help that trade from going negative. In a volatile market that experiences a lot of whipsaws, it would not be wise to use BE. A steady trend up/down would be idea to adjust to BE.

The problem with most traders using BE, is they don't allow they're trade some breathing room. Most traders BE at 10-20 pips and usually does this in a volatile whipsawing market. This is an example of an incorrect way to utilize BE in their trading strategy. Same goes for protective stops. Allow you trade some breathing room so that you're not taken out of the market so soon.

Whipsaw markets are the reason why many traders lose. No breathing room for your trades coupled with tight stops, will always produce a negative outcome. I'd rather give my trades 100 pips stop to let them breathe than place a 50 pips stop in which certain markets range 50 pips before taking off.
  • #5
  • Jun 25, 2010 6:39pm Jun 25, 2010 6:39pm
What is the chance of the best place to put your stop also being your entry price?
Living the adventure in my head.
  • #6
  • Edited 8:46pm Jun 25, 2010 8:04pm | Edited 8:46pm
Quoting Leonlorenzo
What is the chance of the best place to put your stop also being your entry price?
Probably a low chance. But decisions need to made about trade management and you only have a limited amount of information to play with. An ideal trade would consist of placing your stop at level where in order for the market to hit it, it needs to get through 10 billion worth of orders a few pips before your stop loss. But such exquisite stop placement is very rare indeed, and you probably don't have access to that information anyways.

Some systems need to give their trades some wiggle room others don't. So lets say your 300 pips in profit on a swing trade. You eventually need to make a decision. Do I take profit. partial profit? Stop to breakeven? Stop below the recent high/low? Some other trailing stop strategy? Etc

Some other systems benefit greatly from getting stop to breakeven as if your in profit by x amount and the market reverses on you the trade is going to be a loser. Your system may tell you that if the market reverses on you chances are the trade is done and you need to get out at break even saving you the full loss.

It all really depends on what your system is.
Private message me for a link to my order flow website.
  • #7
  • Jun 25, 2010 9:05pm Jun 25, 2010 9:05pm
Static or set value stops are the wrong way to go, imho. Somewhere on your chart, behind your entry is a level (support/resistance,price formation) that breaking that level would indicate your current directional bias is wrong.

Your stop should be past that, and not a place where every other trader will obviously place theirs. From that point to your entry is X amount of pips, this should be figured into your R:R.

You are never certain of the outcome of any trade when it's put on, neither are you certain of the outcome at any point during the trade, although price action can hint to the outcomes. It's up to each individual how to best cover the cost and reduce risk on said trade. If a partial profit is taken that would pay for the stop, reducing risk or guaranteeing profit, why is that bad? Specially if later in the trade price action points the other way.

Most want to just play the percentages, if that's your niche, then cashing early is taboo, but actually managing the trade "if possible" should increase both winning percentage and profitability.

fwiw,
  • #8
  • Jun 25, 2010 9:24pm Jun 25, 2010 9:24pm
Quoting Leonlorenzo
What is the chance of the best place to put your stop also being your entry price?
Same thing with trailing stops. As your stop moves along, it will hardly ever be in an ideal place. By ideal place, I mean a place chosen by any sort of analysis.
  • #9
  • Jun 25, 2010 9:57pm Jun 25, 2010 9:57pm
Quoting Leonlorenzo
What is the chance of the best place to put your stop also being your entry price?
Assuming the entry price was at or near a turning point (bounce off of local support/resistance) very high.

My EAs tend to move trades to breakeven + 1 as soon as possible. Given the nature of some of my trading, this method is quite useful for catching me in the event of a false signal.
  • #10
  • Jun 25, 2010 10:05pm Jun 25, 2010 10:05pm
You're going to find that a lot of times price will retest S/R levels before moving on. If you jump in and move SL to BE too soon, that test will knock you out. That's, personally, why I don't move to BE in one single step... I move to half-risk first, then BE.
  • #11
  • Edited 10:45pm Jun 25, 2010 10:25pm | Edited 10:45pm
Quoting Brb-Fraudin
The exact same thing.

Perhaps starting a thread like this is wrong/noobish

Adding to what was said above - thers no one way to trade and sometime BE may be necesary and other times maybe not - but it of course depends on the person, strategy , time of day, market conditions, expectations, imminent news, importance of news etc etc

I think its just a silly statement - I can see what you're saying but if you're 30 pips profit with 2 lots that's about it - it's not a profit its a paper profit - If you are worried about what "could of been" then you're in for a long ass road. What if you decide not to move to break even and it takes out your -30 stop... Then your opportunity cost is 60 pips not 30 with a net result of -30 instead of 0...

Its an interesting subject but a personal one at the same time.
Time hides Nothing
  • #12
  • Jun 26, 2010 2:43am Jun 26, 2010 2:43am
High momentum entry to quick risk mitigation(moving to BE/+) is one of the secrets to this game.

Closing positions on 30 pip TP's or getting your full SL hit is NOT.
  • #13
  • Jun 26, 2010 3:02am Jun 26, 2010 3:02am
Quoting Rabid

Moving to SL *MIGHT* decrease your net return. It will have no affect on your winning %. It might actually increase your winning %, altho those wins will be smaller.
You have a system that every 100 trades , it wins 70 and loses 30. So you boldly assume that moving SL to BE will make you lose only 25 and win 70 ?? Why not lose 30 and win 65 ?? How do you know that when price returns to its entry point there is more chance it will hit SL than it will hit TP ??

If you entered at S/R area or a break of S/R , there is more chance that price will bounce in you favor again , not the opposite.

A system with high percentage of winning , when price returns to the entry , why do you assume it has more chance to hit SL than TP ??!!

And saying the signal is false ?? So if you have a SL of -30 , when price move -20 pips , you don't consider this as a (false signal) ?? What do u do ? Do u close half the position at -20 pips and let the other hit -30 ?? No , you watch the whole trade hits SL. You respect your SL but not your TP because of your uncertainity. If price went to -20 there is MOOOORE chance it will hit SL than TP , but yet you don't close half the position , you only close it before TP!?
  • #14
  • Jun 26, 2010 5:28am Jun 26, 2010 5:28am
If I'm +150 pips after a day or two and it had already swung against me in the interim before advancing again, I'm going to move my stoploss to at least breakeven so that I can sleep at night.

Rob
  • #15
  • Jun 26, 2010 5:45am Jun 26, 2010 5:45am
Quoting CindyXXXX
Perhaps starting a thread like this is wrong/noobish
No its not wrong.many people will get lots of idea from this kind of argument,if they are wiilling to learn.
question or argument could be wrong but many can get some use full info from those argument.
have a nice weekend
Regards
sho
  • #16
  • Jun 26, 2010 6:34am Jun 26, 2010 6:34am
It depends on how and what you trade.

If you trade breakouts, then you have to always assume that the BO point will be tested after the initial break. So, if it breaks 30 pips north, you shouldn't move to BE, but you should tighten your stop some.

Once price makes a retrace towards the BO point, even if it doesn't hit it exactly because many times it won't, and then turns back north, then you go to BE. If you get taken out on a second retrace, so be it.
  • #17
  • Jun 26, 2010 9:49am Jun 26, 2010 9:49am
Quoting trade price
No its not wrong.many people will get lots of idea from this kind of argument,if they are wiilling to learn.
question or argument could be wrong but many can get some use full info from those argument.
have a nice weekend
Regards
sho
I believe CindyXXXX was referring to the fact that this thread was started a few days after another "Moving Stops to Breakeven" thread was begun by Xtrader in the same forum: http://www.forexfactory.com/showthread.php?t=242595
  • #18
  • Jun 26, 2010 10:16am Jun 26, 2010 10:16am
Quoting billflet
I believe CindyXXXX was referring to the fact that this thread was started a few days after another "Moving Stops to Breakeven" thread was begun by Xtrader in the same forum: http://www.forexfactory.com/showthread.php?t=242595
i do understand.but if you read both thread(i guess you have).you will find lots of info those are not same as other thread.(usefull or not)
few traders like yourself answered here but not there.same with mr dopey and Rabid.
many times people goes to one thread not other one eventhough both two threads subject is same.
Have a good time sir!!!!!
Regards
sho
  • #19
  • Jun 26, 2010 10:33am Jun 26, 2010 10:33am
Quoting grkfx
An ideal trade would consist of placing your stop at level where in order for the market to hit it, it needs to get through 10 billion worth of orders a few pips before your stop loss. But such exquisite stop placement is very rare indeed, and you probably don't have access to that information anyways.
Order flow in a nutshell. Thanks.

So I guess a trader'd have SL and TP, wherein one or both of them sometimes changes into BE, given, with new data found after trade entry, a change in some of the reason to trade or a general surrender to randomness.
  • #20
  • Jun 26, 2010 10:56am Jun 26, 2010 10:56am
Quoting trade price
i do understand.but if you read both thread(i guess you have).you will find lots of info those are not same as other thread.(usefull or not)
few traders like yourself answered here but not there.same with mr dopey and Rabid.
many times people goes to one thread not other one eventhough both two threads subject is same.
Have a good time sir!!!!!
Regards
sho
Fair enough. Since I hadn't seen the first thread before posting here, I thought maybe you had missed it as well.
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