Why do some traders move the stop loss to the cost line soon after the floating profit of the order?

In forex trading, we have two instincts that are put to the test by various repetitions. One is loss aversion and the other is uncertainty aversion. Loss aversion means that when people face the same amount of gains and losses, they think that the loss is more unbearable to them. Uncertainty also makes us uncomfortable, because certainty brings a sense of security.

​Tversky and Kahneman proposed this concept in a paper in 1979, which stated that the psychological impact of loss is greater than the gain of the same amount, that is to say, losing five dollars on the road brings you The unpleasantness of coming is greater than the five dollars you picked up while walking on the road.

Because of the behavioral bias of loss aversion, if the trader opens a position in the right direction, there will be some profit. At this time, moving the stop loss to the cost price of opening the position is very helpful to protect the trader's psychology.

However, fundamentally speaking, this method is not the perfect way, it is just one of the feasible ways. The adjusted stop loss line also changes the profit-loss ratio and winning rate.

for example:

The first one, the red line is the cost line. When your floating profit reaches the highest point, you move the stop loss line to the cost line. At this time, the market has plummeted, and you have stopped the loss at the cost line. At this time, your behavior has received positive feedback.

The second is that the red line is still the cost line. When your floating profit reached the highest point, you moved the stop loss line to the cost line. At this time, the market fell, and then fell to a few points below the cost line, and then again start up. The orders that you could hold at the stop loss line were "washed out" because you adjusted the stop loss line to the cost line. This time, all you get is negative feedback.

Many traders are unwilling to be stopped by the market at cost, and they choose to do nothing until the market takes profit, or they stop the loss and leave the market. ​

Therefore, these two methods have their own advantages and disadvantages, and there is no better one.

This is the most common trading method, the purpose is to expand profits with zero risk, and it is also better to prevent losses caused by unexpected market conditions!

First, you can guarantee that the transaction will not lose money. Second, most of the position opening points are support points or resistance points. When the price returns after making a profit, it is very likely that the market will reverse. At this time, the stop loss can be left to wait and see.

Before I came into contact with quantification, I have been doing this all the time, pulling stop losses to protect profits.

After getting in touch with quantification later, I wrote programs for backtesting the two cases of pulling cost and not pulling cost respectively. After comparing more than a dozen varieties, I found that the rate of return of pulling cost is lower than that of not pulling cost in most cases. Because pulling costs will increase the winning rate, but will reduce the profit-loss ratio, so there is no such thing as pulling costs in my strategy anymore.

Why is there such a behavior of pulling costs? Because it can reduce the psychological pressure of holding positions during subjective trading, and can help you do a good job of holding positions, so there is no problem with adding this action to subjective strategies.

But quantitative trading is purely rational, so there is no need to add this behavior in order to pursue higher yields.

By the way, for most trend-following strategies, the effect without a stop loss is better than that with a stop loss. If you don’t believe me, you can try it.

But all strategies must still have a stop loss, whether it is an explicit stop loss or an invisible stop loss, think about why this is.

Because the market is erratic, when the market reverses, you can keep your capital and get out without losing money. What is lost is only a part of the profit. But I personally don't particularly approve of this kind of operation. Personally, after entering the market, set a stop loss and a stop profit and just leave it alone. If there is a floating profit and the stop loss is pulled to the cost line, it is likely that there will be a reverse draw or a shock, and the position that entered the market will be wiped out, and then follow the direction of the previous position. After sweeping out of the field for protection, there will often be hesitation or no position when re-entering the field.

What's more, after entering the market, if you don't have the confidence to sweep the profit and worry about the market reversal, then it is better to directly stop the profit and exit the market when you feel that the market is not right. Wouldn't that be better? And if the target of stop profit is hundreds or thousands of points, why should you care about that little loss?

This is a personal operating style. When you have confirmed an entry but are not sure about the exit position, you can do this. Usually, you will do this when you do not have enough control over the market. The premise is that the entry must be accurate and you can Get out of the cost zone quickly, but don’t do this when you have control over the market, or you will lose a large part of your profits

Expected value is closely related to winning odds*odds.

The winning rate is determined by the stop loss and the stop profit. The stop loss is the main factor, and the stop profit is the secondary factor. That is to say, the winning rate is most affected by the stop loss.

If you move the original stop loss line according to the trend, or keep your capital and push it flat, the stop loss rate will inevitably increase, and the winning rate will decrease accordingly. Although this move compresses the risk and reduces the loss, it also increases the odds.

Winning rate and odds, there are two factors, one is reduced, the other is increased, it is hard to say whether the overall increase or decrease? But this move really changes the expectations, the trading model is destroyed, and you can't tell it has improved.

(Note: The man who moves the stop loss line along with the trend and keeps the winning rate unchanged will say otherwise.)

My approach is: stabilize the winning rate and increase the odds.

To stabilize the winning rate is to stabilize the stop loss, and then increase the stop profit.

After opening a position, either stop the loss (this part of the loss was originally planned to be borne), or release the profit, so as to improve the overall efficiency.

In fact, this is also a way to track the trailing stop loss, but my original stop loss line is not moving. After the price reaches the stop profit line, I start to track the trailing stop loss.

If you don’t want to be so troublesome, you can also wait until the profit stop position, and then use a certain moving average to track the moving stop loss.

Someone mentioned the problem that the take-profit line is executed. In fact, the take-profit line is a virtual line in the heart. Do not draw the line in the software, and the line will be executed. When the price reaches the virtual line in your heart, draw the line again.

The important words are said three times: don't move the stop loss line, don't move the stop loss line, don't move the stop loss line . This can destroy the breakeven of the trading model.

It is hard to say whether to reduce or increase the profit advantage, but it will definitely destroy the breakeven of your trading model.

Taking long positions as an example, the recommended method is: move the take-profit line.

1. Keep the stop loss line unchanged, cut off the loss, and stabilize the loss item so that the loss does not expand.

2. After the price breaks through the take-profit line, it will not stop profiting until the price turns around (from top to bottom) and returns to the take-profit line, then close the position and exit the market. Stable profit item.

3. After the price breaks through the take-profit line, stop profiting. If the price continues to rise, move the take-profit line. If the price continues to rise, then move the take-profit line, and so on, until the price turns around and returns to the take-profit line , close the position and exit the market. This is to let profits run and increase the profit-loss ratio.

In this way, the loss side remains unchanged, and the profit side is improved, so that the profit and loss balance of the trading model will not be destroyed, but can also be improved.

The subject said: "I feel that there is not much advantage in doing this for a long time."

Vague words such as "feeling", "like", and "how big" cannot be used as trading references. Different trading systems correspond to different stop loss strategies. If you have backtested your trading system, using this method really reduces For profit, it can be judged that your trading system is not suitable for this set of stop loss strategies, but it cannot be concluded that "there is not much advantage in doing this for a long time".

Your question is whether you need to pull the stop loss to the cost line as soon as possible.

In fact, it is correct to adjust or not to adjust the stop loss to the cost line. The difference between the two is nothing more than:

1. The strategy adjusted as soon as possible, the stop loss frequency is higher, the transaction frequency is higher, the transaction level is lower, the fault tolerance rate is lower, but the single stop loss amount is smaller;

2. If the strategy is not adjusted as soon as possible, the stop loss frequency will be lower, the transaction frequency will be lower, the transaction level will be higher, and the fault tolerance rate will be higher, but the single stop loss amount will be higher;

There is no essential difference between the two. Both strategies can make profitable trading systems, but they only match the personalities of different people.

It cannot be generalized.

If you rely on the support level to go long, don't raise the stop loss. The stop loss position is the position where you expect the support to fail, and once it is raised, it loses its meaning.

If you follow the trend and add positions with floating profits, I will let the cost line after the increase be below the strong support level, and at the same time use it as a stop loss point, so that the worst result is no loss and no profit, avoiding psychological blows.

In short, it depends on your billing position and logic. If after placing an order, based on the follow-up trend, you feel unsure, you can go straight away, or set a guaranteed loss, which is a good choice.

This is a manifestation of cutting losses and allowing profits to run. The core of the profitable system is to cut losses and let profits run, so all links should be built around this core!

Probably two ideas predominate:

1. Floating profit is optional, but I cannot lose money

2. It is easier to accept flat push than to accept floating loss or stop loss

Specifically, it depends on personal choice. If you choose to guarantee your capital, you will have less tolerance for market fluctuations. Missing problems can indeed arise. However, there is still a trade-off. If you choose this, you must or give up the other.

Of course, different measures can also be taken for different situations. Rather than a single approach to deal with all situations.

This is a method of fund management. Many people do not pursue technology, but pursue fund management to achieve the ultimate.

The floating profit you mentioned is not a stop loss, it is a protection for this opening position.

The general idea is as follows:

1. After selecting the target to enter the warehouse, it is required that the floating loss is not allowed to be large after entering the market, and it will generally be within a few points.

2. After the calculated loss point is very small, it is generally a heavy position to enter. This is the core of this strategy.

3. When there is a floating profit on the market, when calculating how much to sell with floating profit at this time, the remaining positions can be guaranteed not to lose at the initial point of loss, then the remaining orders in this way are zero risk and fighting the market.

This set of strategies must first be that opening a position is the most critical moment. As long as there is a floating profit, it is basically safe for this transaction. The key point is to accept the loss point of starting a heavy position.

This question involves traders' risk management strategies and trading psychology. When a trade starts to turn a profit, there is less psychological pressure on the trader because the trade has performed better than expected. But even if a trade starts to turn a profit, it still faces the risk of market volatility and uncertainty.

Therefore, many traders will suggest pulling the stop loss to the cost line as soon as possible, in order to avoid losing the original profit due to market fluctuations. In this way, the trader can minimize the risk and ensure that no losses will be repeated, while retaining the profits already made. This is a common risk management strategy, especially when traders face high volatility or uncertain markets.

However, this strategy also has certain drawbacks. When a transaction reaches the cost line, the setting of the stop loss price may cause the trader to miss some feasible profit opportunities. Therefore, traders need to maintain a balance when choosing stop loss prices, and find the best balance between risk management and profit potential. In this case, traders are advised to refer to factors such as market trends, technical analysis and fundamental analysis in order to better manage risks and take advantage of market opportunities.

In short, traders need to decide when to pull the stop loss to the cost line according to their own risk management strategy and trading psychology. While this approach may miss out on some potentially profitable opportunities, it ensures that funds are protected during times of increased market volatility or uncertainty, allowing for better risk management.

It is necessary to move the stop loss forward to protect the profit, but the timing is very important.

Not too early. If you move forward as soon as there is a floating profit, you will find that it is easy to be knocked out by accident and miss the profit. (In other words, too tight a stop loss affects a take profit)

It can't be too late. At the end of the market, good profits disappear in an instant. (In other words, too loose a stop loss magnifies the loss)

Wait patiently for the right time, wait until some floating profit has been accumulated, and the price is far away from your cost price before moving forward, taking it as a protective measure that does not affect stop profit at all.

After moving to the cost line, it's not used to wait for triggers, it's just a precautionary measure. Leaving the market depends on a reasonable stop profit.

When the stop profit does not fully take effect and the profit starts to shrink sharply, don't wait for the price to hit the stop loss line, and leave the market as soon as there is still some profit. Calm down, there are opportunities.

add another point:

The premise for all this to work is that you can capture a better entry point and enter the market when you are about to step out of a trend. In this way, the price is unlikely to come back after going out for a period of time.

If you do not have enough entry skills, the position is always poor, and the price is still in the shock range after entering the market, then moving the stop loss forward will become a nightmare instead.

Many people have a habit of pulling the stop loss to the cost line after starting to make a profit. The advantage of this approach is that once the market reverses, you can keep your capital and get out without losing money. What is lost is only a part of the profit. But I personally don't particularly approve of this kind of operation.

Personally, after entering the market, set a stop loss and a stop profit and just leave it alone. If there is a floating profit and the stop loss is pulled to the cost line, it is likely that there will be a reverse draw or a shock, and the position that entered the market will be wiped out, and then follow the direction of the previous position. After sweeping out of the field for protection, there will often be hesitation or no position when re-entering the field.

What's more, after entering the market, if you don't have the confidence to sweep the profit and worry about the market reversal, then it is better to directly stop the profit and exit the market when you feel that the market is not right. Wouldn't that be better? And if the target of stop profit is hundreds or thousands of points, why should you care about that little loss?

Trading in the financial market requires technology and skills.

People who work hard make money. Smart people do it and make big money. With the correct methodology, there is a path to wealth.

Risk first, skill to make money second. Then why should the stop loss be pulled to the cost line as soon as possible after floating profit?

Its preparation goal is to maximize profit points.

On the one hand: it is to reduce the time to watch the market, the trend of making money gradually appears, and wait for the stop profit.

On the one hand: reduce the time to watch the market, and when the variety falls, the stop loss is also on the cost line, and there will be no sharp drop or dive. This further reduces the risk of occurrence.

Immediately pull the stop loss to the cost line after the floating profit, which is highlighted immediately, otherwise thousands of lots will be reversed suddenly, and the future trend will continue to reverse, continuous losses, more and more losses, stop loss will lose its meaning.

This kind of situation often occurs in the frequent occurrence of the upper shadow line plus the lower shadow line and in the volatile market at the hour level. For example, some varieties occasionally have frequent uncertain trends for a period of time, sweeping up and down to stop loss, and there is almost no profit. point.

The same is true in the market where the shock range is too narrow. Continuous small positive k, suddenly a big negative k, or several consecutive small negative k drop, just when you complacently follow a trend order, it suddenly comes in a big positive k in the opposite direction to your order. These are the reasons for not pulling the stop loss to the cost line in time.

This tells you why many people lose money?

Making money is not based on the winning rate, but more importantly on the ratio of profit to loss. The reason to keep your capital as soon as possible is because of fear. You are afraid of losing money. In speculative activities, if you want to win and are afraid of losing, you will only lose more. At the same time, it is also a manifestation of lack of confidence in the future market development. He did not realize that losing money is not terrible. What he is afraid of is missing out on big profits. People like this kind of people who make a small profit and try to save their capital as soon as possible are basically dominated by fear. In the market, they The performance is long-term stable loss of goods.

Why am I so sure? Because I used to be that kind of person.

This method of guaranteeing the order is applicable to the long-term, but the frequency of price contact for the short-term setting of the guarantee order is too high, and it is difficult to work.

The long-term operation is to test the position - increase the size . If the market confirms the prediction, due to the operation of increasing the position with floating profit, the position will become heavier and heavier, and the cost of building a position will continue to rise. You don’t know whether the market will reverse or reverse tomorrow’s movement in the opposite direction. Callback, the psychological pressure is very high, and it is very tormenting. At this time, setting up the guarantee order is a subjective and selective balancing operation-it can not only stabilize the mind, hold the position and use the floating profit to gain a greater possibility of profit, but also avoid losses. The risk of risk, that is, everyone's word of mouth: " Cut off losses and let profits run ". In fact, this operation is still derived from fear, and the effect of calming the mind is greater than rational trading planning . The side effect of flat push is also obvious, that is, the "correct" position may be lost. As mentioned above, the operation of increasing the position with floating profit will make the cost continue to rise, so the stop loss space is limited, and a large box shock may hit the market. Drop the stop loss and lose the position. After losing the position, in addition to the need to re-enter the waiting period, wait for the signal to re-enter the market, re-test the position-increase the position, and face the frustration of losing a huge floating profit, which is very torturous.

Any strategy has advantages and disadvantages, and the same is true for the operation of guaranteed orders. Indeed, many traders think that flat push is a very good operation choice. But as far as I am concerned, the stop loss should be based on the support and pressure in the form, rather than this kind of flat push strategy that is more inclined to psychological comfort. Several pullbacks are normal in a major trend. Since you have chosen a trend, you have to accept the pullback. Flat push does cut off the loss, but it also rejects the pullback. Trend trading relies on a few trending markets to make money. If you don’t have the courage to catch it, It is also difficult to make a profit. Although there is no danger of liquidation, it is easy to fall into a dead end of losing money steadily. Of course, it is also possible for the trend to reverse. When encountering a reversal, stop the loss according to the shape. Loss and profit are the normal trading conditions. It is not advisable to be full of studs, and it is also not advisable to be too timid. If you are afraid of losses, you cannot change , it is better to let yourself go, leave this cruel market, and give yourself peace of mind.

Transactions must not only be objective and rational, but also courageous, courageous, and courageous.

Risk control is a must.

It is not necessary to do this, even if a large number of backtests show that although your trading method will lose money, but the overall profit is, you can stop the loss, do it in separate positions, and stop the loss when the position is liquidated.

But the use of active stop loss will make many people feel better and will not be tortured in floating losses for a long time.

The reason why traders will pull the stop loss to the cost line after the floating profit of the order is because this approach can help them protect the profits they have obtained before. Specifically, this

This practice allows traders to turn floating profits into actual profits while ensuring at least no losses.

For example, suppose a trader buys a certain commodity, and the price rises within a certain period of time, and his trading list starts to float. At this time, if no stop loss is set, the current price

When the price falls below the initial purchase price, the trader may face the risk of losing money. But if he sets the stop loss price as the initial purchase price when he is in floating profit, when the price

When it falls back below the initial purchase price, the transaction order will be automatically stopped, so that the trader will not lose money.

Of course, this approach has its risks. If the price rebounds and continues to rise, the trader may miss out on more profits by pulling the stop loss to the cost line early. Place

Therefore, traders need to decide whether to adopt this strategy based on market conditions and their own risk tolerance.