why is it wrong to move the stop to BE? I maybe should have closed 50% then moved to BE. There are gonna be times when my stop isnt hit and times when I dont move the stop to BE that I lose money.
Why is it wrong to move to BE? OK, perhaps I came across as too heavy handed. It's not for me to say anything is "wrong" but I've got a good deal of experience with the "breakeven move" having seen it severely hinder performance in both my own account and others.
Infact one of the biggest and most successful professional traders I have ever worked with, who used to get sick of me ranting about "how I would still be in if I hadn't moved my stop to lock in profit" told me in plain English that I was a c*nt for moving the stop to breakeven. (I'm not sure if he was that polite). Since I stopped doing it, I've never looked back.
Remember, I've traded the J16 strategy. Infact, I pretty much re-taught it so again, it's not a subject I'm unfamiliar with. It is my statistically proven experience that moving to breakeven will turn it from a winning strategy to a losing one. As will taking 50% off and moving to breakeven. All that doing that will mean is that you bank 50% when you win and lose 100% when it goes wrong.
This is because almost every single time it makes absolutely no sense in the context of where the market is trading. If, for example, you take a trade at the top of a pin, you are entering in the middle of no-mans land after the market has moved away from support. The market knows about previous highs. It knows about previous lows. It knows about support. It knows about resistance. It knows about patterns. It does not know about where Scotty2Cues entered and has a risk free trade.
So what does it mean when it comes back and takes you out?
Does it mean your analysis was wrong?
Hell, no.
So what does it mean?
Sweet FA.
That's the sad thing about it. It means you just got shaken out of what could (and usually is) a great trade because you were afraid to take a loser.
As a result, you just don't get anywhere by using this BE move that one sees touted everywhere.
If you don't believe me on any of this, try it yourself.
J16 himself argues in favour of the BE stop but you have to remember a few things:
1) He is trading an account that is far larger than 99.9% of everyone he teaches.
2) He never takes full bar losses.
3) He doesn't seem to give a flying f*ck when a market that he was in goes to the moon, or at least he never moans about it.
4) Most of his trades seem to get to the first problem area so he almost always gets some profit anyway. Infact his strike rate is partly the reason why his strategy makes money at all since if you use full bar stops, the R:R on most of those trades I've seen called is not particularly appealing.
When you consider point 2 in particular it does perhaps make a
little more sense for him.
Still, I'm coming to believe more and more after listening to people and seeing for myself that, as Spanish89 once said and I foolishly ridiculed him for, a stop is more about making the broker money than protecting your account if you are inexperienced in this game.
I'm not saying that traders shouldn't use stops (although I don't use them in the way most do) but I am saying that most new traders are taught ALWAYS USE A STOP. It's like the first rule that is thrown in their face and yet they don't have the experience to know where to put them. Thus, inevitably they:
a) put them in the worst place
b) move them every two minutes to try and greedily lock in every cent of profit only to see the market naturally retrace and knock them out and then go the way they intended
The only thing stops are good for is for those people that are:
a) unable to check in on the markets or ;
b) liable to get married to a position and need to rely on the broker to get them out because they can't face taking the pain themselves.
If you can honestly say that neither of the above apply to you then personally, I would demo another method alongside your existing one. In this "new" or "other" style, try taking a position with no stop at all. Don't put a stop in during any part of the trade. Not at the beginning when you take it and not during it when it is offside or massively in profit. Review the trade every hour (if you trade off the hourly) or every day (if you trade off the daily) etc and ask yourself: if I was not in this, is this a buy or a sell? Make sure that when you ask yourself this, you
cannot see your P&L. If it still looks good, stay in it, if you are now unsure or if your opinion now runs counter to your original entry, simply close the trade.
I will be very surprised if you don't do better.
