Is Moving Your Stop To Breakeven A Mistake?
By Dave Mabe
On this week's episode of Line Your Own Pockets, we answer a question I received from Emmett:
Towards the end of a recent episode, you guys started talking negatively about moving stop losses up to break even on a winning position. I found this interesting as I tend to move my stops up. The reason being that I don't like to have more than a certain % of my account at risk at any one time and so if I'm in a position to take risk off somewhere, it allows me to take on new positions or maybe add risk elsewhere. Am I thinking about this all wrong?
It's a great question that many traders eventually consider.
We discuss:
Similar to taking partial profits, moving a stop to breakeven is more about psychological comfort
Profitable trading requires tolerating discomfort, as difficult as that is at times
It seems like a simple idea to test, but it quickly adds significant complexity to a backtest
How to actually test this in a backtest
This is a great example of the platitudes you often hear from people who are good at talking about trading, but don't actually trade.
-Dave