Moving your stop loss to your entry price after a trade moves in your favor, eliminating risk on the position.
A breakeven stop is the practice of moving your stop loss to your entry price (or slightly above to cover commissions) once a trade has moved a sufficient distance in your favor.
How It Works
- Enter long at $100 with a stop at $98 (risking $2)
- Price moves to $103 ($3 in your favor)
- Move stop from $98 up to $100 (your entry price)
- The trade is now "risk-free" — worst case, you break even
When to Move to Breakeven
Common approaches:
- After 1R profit: When the trade has gained as much as your initial risk
- After key level break: When price breaks past a significant support/resistance level
- After partial profit taken: After scaling out of some contracts
- Time-based: After the trade has been profitable for X minutes/hours
Pros
- Eliminates risk on winning trades
- Reduces psychological stress
- Protects profits that count toward evaluation targets
- Allows you to hold for larger moves with no downside
Cons
- Premature stops: Price may dip to your entry before continuing higher — this is the biggest criticism
- Reduces overall win rate if trades frequently retrace to entry
- Can cause frustration when a trade you were right about gets stopped for zero
For Prop Firm Traders
Breakeven stops are popular because protecting capital is paramount. Being stopped at breakeven is far better than having a winner turn into a loss that eats into your drawdown.
Pro Tip
Instead of exact breakeven, move your stop to entry price + spread + commissions. This ensures a true breakeven after costs.