Lessons › Why traders lose › The only way a stop may move
World 11 · Why traders lose · lesson 4 · level 2
The only way a stop may move
A stop only moves toward profit, never further away.
In one line
Your finger moves the stop lower, just this once. Here is what that habit costs.
Explained simply
When price comes close to your stop, it is tempting to move the stop further away. Half the time price comes back, which is why the habit sticks. The other half, the loss doubles. On average it saves almost nothing. The one allowed move is up: once price is one stop-distance in your favor, you may move the stop to your entry.
Mistakes to avoid
- Moving the stop lower "just this once".
- Moving it again and again as price keeps falling.
- Moving the stop to the entry so early that normal noise takes you out.
Check yourself
979 real trades hit their stop. How often did price come back to the entry before falling another full stop?
About half: 52%. 52% came back to the entry first; 39% fell another full stop first; 9% did both in one candle.
You move the stop down and price does not come back. Your loss…
Roughly doubles. Moving the stop one more stop-distance away makes the loss twice as big when price keeps going.
Which way may a stop move?
Up, toward profit. A stop may only move toward profit, for example to the entry once price is one stop-distance in your favor.
On 1,726 real setups, moving the stop to the entry after a one-stop move in profit…
Saved 132 losing trades but cut 72 winners short. It helped a little and ended 268 trades at zero, but it did not turn the setups into an edge.
Bitcoin, May 2022: the stop was hit the next day. What came after?
Price touched about 33% lower within eight days. From $39,690 on 4 May, price touched $26,700 on 12 May. Every moved stop was hit on the way.
Goal of this lesson: Keep your stop where it is, or move it only toward profit.