In this video:
00:30 – Should you move your stop loss to breakeven.
01:05 – No relevance to the price you entered.
01:40 – Alternative ways to manage a trade.
02:38 – Take the full profit not a partial profit.
04:00 – Check out my new Masterclass.
04:12 – Blueberry Markets as a Forex Broker.
04:27 – Forget moving your stop to breakeven.
Do you realize that the market doesn’t care why you entered the trade or where you entered the trade? So why do people have this massive obsession with moving their stops to break even all the time? Let’s talk about that and more right now.
Hi there, traders! It’s Andrew here at The Forex Trading Coach with video and podcast number 647.
Should you move your stop loss to breakeven.
Outside on another stunning winter’s day here in Nelson, New Zealand. So today I want to talk about moving your stops to break even. Why do so many people do it? I’ve had so many discussions with people. It’s got me into a bit of trouble in the past at certain trading conferences that I’ve been to because of my opinion.
Now, I’m not saying don’t move your stop to break even. If you have a strategy and it works, go for it. I’m not saying you shouldn’t do it.
But my question to you is, why do you do it? And what’s the point in doing it?
You see, so many people just think moving their stop to break even is a safe way of trading, and it protects losses, which in some ways it can do. But there are so many better things you could do.
No relevance to the price you entered.
You see, for me, moving a stop to break even has no relevance. The market doesn’t care when you entered the trade, why you entered it, or what the price was.
So you’ve just entered the trade at some random price. You’re in the trade now. Simply putting your stop loss at that entry price, what does it mean? It means nothing.
Technically, it means nothing. If you’re a news trader, it means nothing. What is the point in doing it?
And for me, it’s just a bit of a fluffy, feel-good thing. You know, pretty brutally honest, but I think it’s true that people just feel okay about not losing on the trade.
Alternative ways to manage a trade.
Now, the issue I have with that—well, there are many. Moving your stop loss to that price point has no relevance.
So what you could do instead is maybe close part of your trade. You could move your stop loss, if you really want to, but to a technical level. Don’t just put it simply at the price that you got filled at in the market.
You could, on a buy trade, let’s say, put it below the last swing high, or you could put it below a round number and stagger the trade up as it gets into profit. That’s 1 thing you could do.
Of course, if you wanted to do those types of things or partially close a trade, I would do it for a reason.
I don’t just do it because, you know, you feel like it. Do it for an absolute reason. And I think that’s the important thing here.
We’ve got to try and get our emotions out of trading and manage our trades for a reason, not simply because it feels good.
Take the full profit not a partial profit.
The other problem I have with moving stops and messing around with your trades is when you close a trade early, what you’re doing is limiting your potential gains.
Now think of it this way. For most people, if they take a loss, they take a full loss. If they move their stop loss to break even, they basically get nothing from the trade on the entire position, let’s say.
But what happens if you’ve already partially closed some of your trade and it gets to the full profit? Well, you’re not gaining the full lot size of your original trade when you hit profit.
So when you say you made a 2-to-1 trade or a 3-to-1, whatever it might be, you might only be making that on part of your original lot size. So your actual overall gain is nowhere near the amount it should be.
So for me, it’s quite important that you enter a trade for a reason. You put your stop loss at a safe level for a reason.
You know your risk, your complete risk, if the trade goes completely against you, and you put your profit target at a level for a reason.
So therefore, if you’re risking, let’s say, 0.5% and you make a 3-to-1 trade, you make the full 1.5% gain.
I think it’s really important that you do that because, like I said, if you take losses, then generally you’re taking the whole loss anyway.
So you want to make sure that when you hit a profitable trade, you get the full gain on that.
Check out my new Masterclass.
A few additional things for you. Have a look at our masterclass. You’ll find it really useful if you’re new to trading. It’s about 20 minutes long. I’ll put some details under this video and podcast.
Blueberry Markets as a Forex Broker.
And if you’re out there looking for a really good broker, I can highly recommend Blueberry Markets. They’re a really good bunch of people, with very quick withdrawals as well, very tight spreads on their trades, and lots and lots of markets on their MT5 platform.
Forget moving your stop to breakeven.
So that’s it for this week. Just consider breaking even. Consider not doing it. Consider better ways of doing it, and try not just to feel fluffy, nice feelings about your trade simply because you’ve made $0.
Episode Title: #647: I Never Move My Stop to Break Even… Here’s Why