Why set to breakeven

Hello,
I don’t understand the logic of this. For example why not set to +10 pips instead then if your stopped out you have gained 10 and not nothing. After all a profit is a profit.
Yours
Mark

Here is an example during a thorough backtest before that I once done, it was a visual bar-by-bar check.

I have noticed that there was one instance where if I set the break even to +0 pips (i.e. same as entry price), the price would come back to within 5 pips, almost taking out my new SL. It was extremely close. Then the price continued in my desired direction until I got my TP.

If I had done what you suggested, i.e. set the break even to +10 pips, I would have walked away with a mere 10 pips because price came back.

Note that this only happened once so it’s hard to say if it’ll happen again.

It all depends on your system and how much testing you have done to determine whether a break even of 0 pips or a break even of 10 pips would make a difference.

In any case, what you are describing is essentially the beginnings of the trailing stop.

It really depends on the scenario, as this whole thing is very arbitrary without any context. If you move your stop to +10 pips as soon as your trade gains 10 pips, you’re going to be left with only those 10 pips after the tiniest volatility swing takes out your stop.

A stop loss is the invalidation point of your trade. As such, your trade is valid until your stop loss is triggered… Meaning you shouldn’t touch the SL until you are ready to exit the market or at least lock in profits. Some people are very strict with Risk:Reward ratios, and will let the trade run until it hits their SL or TP. In my experience, these people are much less successful than those who learn how to [I]properly[/I] manage a trade after the market has moved a significant clip in their favor.

Sometimes it’s really just a strategy to minimize risk rather than being profitable.

Here are my top reasons for adjusting my SL to break-even:

  1. There’s a major report coming up. I still believe that my trade idea is still valid but I’m preparing for any unwanted volatility caused by the report.

  2. Having a risk-free position also makes me more confident to open another trade.

  3. I want to lock in profits by price isn’t too far from my entry yet.

For me capital preservation comes before , profit generation.

Hello Markpounder!

As all my predecessors on this thread have pointed out, it all depends on how you manage risk, and on the context of your trade;[B] as Huck said, for example[/B], during high volatility, it may be worth being more conservative, but if you have a steady trend in the direction of your trade then you may want to move the stop above breakeven once you have cleared your spread [I][B]by quite some distance[/B][/I]. Again, the volatility of a pair outside high-impact news items may be what you base your profit and stop targets on, e.g. using the Average True Range indicator to see what the projected range of a pair may be within a day… therefore, what ‘[I][B]quite some distance[/B][/I]’ may constitute depends on your limit/take-profit target and on the time-frame, as well as the expected range of that pair within the time-frame within which you operate.

As for me, I would just [B]remove emotion from the trade and not move my stop manually[/B] but [B]use a trailing stop[/B]; that is one way to be sure that the stop distance may be within my Risk-Reward ratio: if you placed your stop to break-even too early you may get stopped out with zero loss but also zero profit; if you moved it too late, you may get hit with a bad loss; [B]as nobody truly knows what price may do next [/B], why not use a trailing stop with a pre-determined risk-reward ratio, and take it from there?

Just a thought, and by no means advice!

Thank you and

HAPPY TRADING!