The question of moving stops to B/E

[Rob McDonald]

I've added this forum topic as I'm a big fan of price action. Most of my charts are fairly clean, a moving average and a momentum indicator in some cases.

So I was watching the price move around today I monitor a signal I'm testing at the moment for an FX system. The testing so far on most of my short term systems indicated that bringing the stop to break even performed far worse than leaving it alone while I went after my price targets (of course this will vary depending on the type of system you trade, this is a short term system, longer term system trailing price is more viable).

Most of my stops end up around a swing point or a congestion point, giving a solid technical area for price to test and respect. By brining our stop in to B/E we are no longer observing a level that price has told us is support/resistance, thereby increasing our chances of being taken out on a re-test of the inital zone.

Of course if your numbers test that moving the stop to break even is better because you are scalping and looking for a quick surge that may collapse, then go with it, but I've found this thoery works more often than not when I cast an eye back over various systems I've tested or traded (I don't scalp at all though).

Attached chart shows what I'm talking about, any number of first target themes would have been achieved before the pullback to the 00 level, the news ann. was a bonus that may continue the trade in a favourable direction or could just have easily stopped out.