Many traders believe that you can’t move your stop once the trade starts, thinking that adjusting a stop-loss is a sign of weakness or improper strategy. However, this belief is not entirely accurate. In reality, moving your stop in response to changing market conditions is a common and effective risk management technique. The key is to do it strategically and with clear rules, not impulsively or emotionally.

The idea that you can’t move your stop once the trade starts overlooks the fact that dynamic market conditions often require adjustments for optimal trade management.

Why Traders Believe Stops Should Not Be Moved

Several reasons contribute to the belief that stops should never be adjusted after a trade is placed:

• Discipline and consistency: Traders often feel that once a stop is set, it should remain fixed to avoid “chasing” the market or making emotional decisions.
• Fear of missing out: The idea of adjusting stops to capture more profit may feel like greed or impatience, leading traders to stick rigidly to initial levels.
• Pre-determined strategy: Some trading systems are designed with fixed stops, and traders believe that changing them goes against the rules of the strategy.
• Psychological discomfort: Moving a stop may feel like admitting uncertainty, leading traders to avoid this action to maintain a sense of control.

However, refusing to adjust a stop can also lead to missed opportunities and larger-than-necessary losses in certain situations.

When It Makes Sense to Move Your Stop

There are several situations where moving your stop can be a smart decision:

• To lock in profits: Once the trade has moved in your favour, you can move your stop to breakeven or into profit (e.g., trailing stops) to protect against reversals.
• To adjust for market volatility: If the market is more volatile than expected, it may make sense to widen your stop to avoid being prematurely stopped out due to normal price fluctuations.
• When the trade structure changes: If price action or a technical indicator signals that the market direction has changed, adjusting your stop can help minimise losses.
• To account for new key levels: If price breaks through significant support/resistance levels or moving averages, adjusting your stop to a new level can better align your risk management.

Moving a stop is a flexible tool in a trader’s risk management toolkit, as long as it’s done with purpose and discipline.

Why You Shouldn’t Move Your Stop Arbitrarily

While adjusting your stop can be effective, doing so arbitrarily or emotionally can lead to poor outcomes:

• Avoiding emotional decisions: Moving your stop due to fear of loss or greed can result in premature exits or staying in a trade longer than is wise.
• Risk of over-trading: Constantly adjusting your stop in response to every small price movement can turn your strategy into a reactionary approach, rather than following a disciplined plan.
• Increased risk exposure: If you move your stop too close to price action (for example, in an attempt to lock in profits too early), you might get stopped out prematurely even though the overall trend is still in your favour.
• Chasing the market: Constantly adjusting stops based on price swings can lead to chasing the market rather than letting the trade follow through naturally.

The goal is to adjust stops based on a well-thought-out plan, not emotional impulses.

How to Move Stops Strategically

To move your stops effectively, traders should follow clear guidelines:

• Move to breakeven: As soon as a trade moves in your favour by a certain amount (e.g., 1:1 reward-to-risk ratio), it’s a good idea to move the stop to breakeven to protect your capital.
• Use trailing stops: A trailing stop can be used to allow profits to run while locking in gains as the price moves in your favour. This is commonly done using a fixed distance (e.g., 20 pips) or based on technical indicators like moving averages.
• Adjust for key levels: If price breaks important technical levels such as support, resistance, or Fibonacci retracement zones, adjusting your stop to the next key level can help you manage risk more effectively.
• Evaluate volatility: In volatile markets, widen your stop appropriately to prevent being stopped out by normal market fluctuations. Conversely, in low volatility, tightening stops can protect profits.
• Avoid random changes: Don’t adjust your stop just to “chase” the market. Any adjustment should be based on logical reasons, such as new market information or price action analysis.

Adjusting stops with purpose and discipline allows you to optimise your trade management without sacrificing your overall strategy.

Examples of Moving Stops Wisely

• Trend following: After a trade has moved in your favour and the trend is confirmed, you move your stop to the most recent higher low (in an uptrend) or lower high (in a downtrend), allowing the trade room to continue running.
• News-driven events: If you’re in a trade and a major economic announcement is due, you might widen your stop to accommodate volatility, then tighten it after the initial reaction.
• Breakout trading: After entering on a breakout, you can move your stop to just below the breakout point to lock in some profit if the price retraces but continues to trend in your direction.

Each example demonstrates how strategic stop adjustments can enhance trade management and protect profits.

Conclusion

It is completely false to believe that you can’t move your stop once the trade starts. Moving your stop is a valid and often necessary tool in managing risk and maximising profits. The key is to adjust stops with a disciplined approach, based on market conditions, trade strategy, and risk management principles. Moving stops strategically allows you to protect profits, adapt to market changes, and increase the overall effectiveness of your trades.

To learn how to develop a professional and strategic approach to trade management, including stop placement and adjustments, enrol in our expertly designed Trading Courses today.