Break-Even and Trailing Stops Based on Favorable Price Movement
Summary
This document describes two stop-management functions. A break-even rule moves the stop loss to the trade’s opening price after the market has moved favorably by more than a user-defined threshold. This is intended to remove the original price risk once the trade has gained enough distance, though it does not guarantee a profitable exit after costs or slippage.
A trailing-stop rule moves the stop behind the market by a specified number of points, but only when price is moving in the favorable direction and has advanced beyond the configured threshold from the opening price. The two rules therefore have different roles: break-even shifts protection to the entry level, while trailing stop attempts to retain some gains as the favorable move continues. The document provides only brief functional descriptions and no implementation details, tested examples, market context, or performance evidence. It also leaves key choices, such as point size, update frequency, and behavior in gaps, unspecified.
Key ideas
- A break-even rule moves the stop loss to the opening price after a defined favorable move.
- A trailing stop follows price at a configured point distance when the trade moves favorably.
- Both rules depend on thresholds supplied as inputs.
- The document does not specify update frequency, gap handling, or evidence from testing.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.