{"id":12187,"date":"2016-08-17T22:23:05","date_gmt":"2016-08-18T05:23:05","guid":{"rendered":"http:\/\/www.tradingheroes.com\/?p=12187"},"modified":"2025-07-30T03:03:51","modified_gmt":"2025-07-30T10:03:51","slug":"move-stoploss-breakeven","status":"publish","type":"post","link":"https:\/\/www.tradingheroes.com\/move-stoploss-breakeven\/","title":{"rendered":"Move Your Stop Loss to Breakeven: Why, When and How to Do It"},"content":{"rendered":"

\"Missed<\/p>\n

When you buy something through one of the links on our site, we may earn an affiliate commission.<\/div><\/p>\n

Some traders say that you should never move your stop loss to breakeven and others say that you should do it on every trade.<\/p>\n

So who is right?<\/p>\n

Well they both<\/em> are.<\/p>\n

I know of professional traders who move to breakeven and I know others that don't.<\/p>\n

Every trader needs to figure out if moving to breakeven will fit their trading strategy, the markets they trade and their unique psychology.<\/strong><\/p>\n

In this tutorial, you'll learn when you should move your stop and when to leave it alone.<\/em><\/p>\n

The best solution will be different for everyone, so you need to figure out what works best for you.<\/p>\n

I'll also show you a couple of ways of moving to breakeven and beyond, that can make your trades more profitable.<\/p>\n

Let's do this…<\/p>\n

What Does it Mean to Move the Stop Loss to Breakeven?<\/h2>\n

If you're new to trading, I'll quickly define moving a stop loss to breakeven and give you an example.<\/p>\n

In trading, moving a stop loss to breakeven refers to the practice of adjusting the stop loss level to the trader's entry price, plus a little profit to cover costs like slippage, the spread and commission. This is done after the market has moved in a profitable direction and ensures that the trader will not lose money on the trade, even if the market reverses.\u00a0<\/strong><\/p>\n

The idea behind this tactic is to create a situation where a trade is risk-free.<\/p>\n

Example<\/h3>\n

Here's an example of a trade setup.<\/p>\n

This is a long trade, entering at the current candle.<\/p>\n

The red bar at the bottom of the box is the stop loss and the green bar at the top is the take profit.<\/p>\n

\"Stop<\/p>\n

Once price moves in my favor, I can set the stop loss to breakeven by moving the stop to the entry point.<\/p>\n

I usually move Forex trades to the opening price, +3 pips profit to account for any slippage and fees.<\/p>\n

This is now a risk-free trade.\u00a0<\/em><\/p>\n

\"Stop<\/p>\n

So if the trade reverses, like shown below, I would not lose any money on the trade because my stop loss would be at the breakeven point.<\/p>\n

\"Hit<\/p>\n

Now that you understand how to move your stop loss to breakeven, here are the benefits and downsides of doing this.<\/p>\n

Benefits of Moving Your Stop Loss to Breakeven<\/h2>\n

When you move your stop-loss to breakeven, you do more than ensure that you won't take a loss on the trade.<\/p>\n

You also free up your mental capital to find another opportunity.<\/p>\n

Mental capital is the “space” that a trade takes up in your brain because you're worrying about managing the trade and if you will take a loss.<\/p>\n

Moving the stop to breakeven takes the pressure off your trading because the trade is now risk free and you don't have to think about it anymore.\u00a0<\/strong><\/p>\n

This allows you to focus your attention on finding and managing new trades.<\/p>\n

Let's say that you have 5 open trades that will either lose 1% per trade, or make 2% per trade.<\/p>\n

You then decide to move the stop loss on all of them to breakeven.<\/p>\n

Once you do that, the worst case scenario for these 5 trades is that they will all get stopped out at zero profit…and also zero loss.<\/p>\n

The best case scenario is that you will make 10%.<\/p>\n

So you can see why some traders find this technique so attractive.<\/p>\n

But of course, there is a trade off to this benefit.<\/p>\n

The Downsides of Moving Your Stop Loss to Breakeven<\/h2>\n

The downside of moving your stop loss is that it's more likely that your stop loss will get hit often and you'll lose out on profits.\u00a0<\/strong><\/p>\n

Just like the ocean, markets have a natural ebb and flow.<\/p>\n

\"Ocean<\/p>\n

So it's best not to move your stop too soon because your stop is much easier to hit and you won't give your trades enough room to “breathe.”<\/p>\n

As the saying goes: scared money don't make money.<\/em><\/p>\n

Here's a common scenario, especially for beginners.<\/p>\n

You enter a trade and the trade is profitable right away.<\/p>\n

Since you lost your last three trades, you decide to make sure that you don't lose this trade too.<\/p>\n

So you think you are doing the right thing and move your stop to breakeven.<\/p>\n

Party time!<\/p>\n

As soon as you open a drink…you get stopped out.<\/p>\n

Then the trade goes 500 points in the profitable direction.<\/p>\n

Doh!<\/p>\n

This leads to second guessing yourself even more, which will affect your confidence and profit on future trades.<\/p>\n

No bueno.\u00a0<\/em><\/p>\n

Move your stop loss too soon and you'll break even a lot.<\/p>\n

What this can mean is that your winners won't make up for all of your losers because many of your winners are breaking even.<\/p>\n

If that's the case, then your strategy will not have an edge and will lose money.<\/p>\n

Of course, it also could be possible that you're dodging some losing trades too, which brings me to my next point.<\/p>\n

How to Tell if You Should Move Your Stop Loss on Profitable Trades<\/h2>\n

Not all trading strategies will work well when the stop loss is moved to breakeven, so it's time to figure out if this is for you or not.<\/p>\n

Remember that there are 2 potential<\/em> benefits to moving your stop loss:<\/p>\n

    \n
  1. Greater peace of mind because your trades are now risk free.<\/li>\n
  2. An increase in profitability of the strategy because the strategy has fewer losing trades.<\/li>\n<\/ol>\n

    In addition, if you are going to move your stop loss to breakeven, you must:<\/p>\n