Consider This When Moving A Stop Loss
Moving a stop to breakeven is usually the number one goal after entering the market. The purpose is to remove as much risk off the table as you possibly can so you’re not as exposed. Although how you do it can put some bad habits into your trading that might be difficult to undo.
What is Breakeven +1?
Just to make sure we’re all on the same page, moving a stop to breakeven trade is when your stop loss is at the same level as your entry point. The purpose is to have zero risk where if price came back and stopped you out you would not lose any money.
There is nothing wrong with a break even trade. In fact many people have one signal goal after entering into the market which is to get to that break even stage since if price pulls back you won’t have a loss.
So Why The +1 for Moving A Stop?
As it turns out, you will see this by a lot of traders who are pretty new to trading. They decide instead of “getting nothing for it”, they want “something” and so they put their stop a tiny bit higher. The +1 would assume it’s forex and they are locking in 1 more pip higher than break even. On a standard contract this would be locking in $10 worth of profit.
Why is the +1 Such A Bad Idea?
Psychological Issue #1 – The Need to Win
There is nothing wrong with the theory, but how it could effect you might be where the biggest problem is with this sort of thinking.
Consider:If you need to at least get 1 pip out of the market than that would tell most people that you have a hard time accepting a trade where you don’t make any money – meaning, you must win.
If you have done this before and care to share about your own experiences then leave a comment below as I’d love to hear your story!
Psychological Issue #2 – Dirty Data
By taking such a small profit you’re going to mess around and ruin a lot of your statistics. Your win ratio will be a lot higher, your average winner will be a lot smaller and all of these things will lead to dirty data.
When you have dirty data you will find it harder to find your mistakes (it might even be impossible) which will lower your chance at succeeding. Your data should be as clean as possible with the most consistent actions you can make. Doing all this will allow you to analyze data that will actually help you instead of using false data.
Have You Done This Before When Moving A Stop?
Having a “must win” attitude is going to get you very frustrated as I’m pretty confident that there isn’t a strategy out there that wins all the time. Losses are a part of this game, and in fact getting good at losing can help you out more than polishing your winners and patting yourself on the back.