How to decide whether or not to move your SL level
Should I move my stop loss or just leave it where I initially placed it? This is the dilemma. While we are on a trade and the market moves on our favor, this question always arises.
And let me tell you something, there is no right or wrong answer, but the way we approach the market will tell us which one is better for each one of us.
To find the answer to this question, I want you to imagine these scenarios:
- You open a trade, the market moves on your favor, you decide to move your stop loss level, the market reverses and hits your new stop loss level and it continues against you, this is, if you didn’t move your stop loss level, the market would have hit your initial stop loss level.
- You open a trade, the market moves on your favor, you decide not to move your stop loss level, the market retraces back to the level where you would have moved your stop loss (but you didn’t) and then it continues in the intended direction and hits your take profit order.
Which one is better for you? To decide whether is better for you to move or not your stop loss level, you need to picture yourself in these two scenarios.
Close your eyes, start following your trade on your mind, then decide which scenario you like the most, you are going to like both of them, but you just need to decide which one you like the most.
Now, not everything is favorable, sometimes you also need to consider the worst scenarios
- You open a trade, the market moves on your favor, you decide to move your stop loss level, the market retraces back, hits your stop loss level and then it continues in the intended direction, hits your take profit order, but guess what, your trade is already closed, you missed it because you moved your SL level.
- You open a trade, the market moves on your favor, you decide not to move your stop loss level, the market reverses and hits your stop loss level, where you initially placed it.
Which scenario is worse for you? Again, close your eyes and start following these two scenarios, and decide which one is better for you.
You know there is no right wrong answer, the answer lies within each one of us, what is good for me it’s not necessary good for you and vice versa.
- If you are a trader that hates to see the market going in your direction after you have been stopped out, then don’t move your stop loss level. You are better off leaving the stop loss level where you initially set it, if you thought risking X amount of pips at the beginning, just leave it there.
- If you are a trader that feels nervous once you placed your trade and don’t like to see the market going against you, just move your stop loss level, this way you’ll feel more comfortable.
You should do what you feel most comfortable with, don’t try to copy other traders, because they might feel comfortable doing one thing, but there is no guarantee that you will also be comfortable with it.
Whatever you decide, I recommend you to do it systematically, don’t do one thing with some trades and other with other trades, you’ll have no way of knowing what methodology to follow and it will frustrate you when it turns out as a negative experience.
And please, don’t take decisions like this one on the heat of moment, make a trading plan before the trade takes place.
Let me know what you think, if you have any question, please leave a comment. If you liked the article, “like it” or tweet about it.