When Should You Move Your Stop Loss? A Full Technical Analysis Guide for Traders

Today is a relaxing weekend, so I want to share an issue that many traders often face: Should you move your Stop Loss(SL)? If you do adjust your SL, when should you move it, and where should it be moved to?

Most forex traders — and traders in general — pay a lot of attention to adjusting their Stop Loss, especially the habit of moving the SL to the Entry point after the trade goes in the right direction and is in profit. Many beginners ask what “SL to Entry” means: this simply refers to shifting the Stop Loss back to your entry price. But is this decision the right one? In today’s article, I will break down this issue from the perspective of pure technical analysis, meaning we will rely strictly on technical signals to decide how and when to move the SL.

First, I must emphasize: moving your SL to Entry or to a profitable level (so that even if SL is hit, you still gain profit) without relying on technical signals is purely a psychological solution. It only provides emotional comfort because it creates two outcomes: breakeven or win. However, what many traders ignore is the advantage of a trade that is going in the right direction. If the SL movement is not logical, causing price to hit your SL and then continue moving in your original direction, that is truly unfortunate and frustrating.

We all know the market always moves in a zigzag pattern — waves of ups and downs. Price rarely moves straight to the Take Profit (TP), unless your TP is smaller than the average wave movement on your chosen timeframe. Therefore, whether you move your SL to Entry, shorten your SL, or move it to a profitable point, the decision must be supported by technical structure for long-term consistency.

Below are my personal views and how I apply this in practice:

---

For a SELL trade

• Your initial SL and TP should always be placed using support/resistance (swing highs and lows). I explained this in a previous article here: https://www.caphile.com/2025/11/how-to-identify-tops-and-bottoms-in-forex.html
  (This internal link is also helpful for readers who want more clarity.)

• After entering the trade, if price drops and your position is in profit, do not immediately move SL to Entry. Instead, wait until price forms a corrective wave upward.
  If the peak of this pullback wave is lower than your Entry (after accounting for spread and noise), only then should you move SL to Entry.
  In most cases, price will continue breaking the most recent low and form new bearish waves, making your Entry-level SL quite safe.

• If the pullback peak is higher than your Entry, then move SL above that pullback peak. If the peak is much lower than your entry price, you may move SL to that peak — giving you a profitable SL instead of breakeven.

• Identifying a true pullback peak only occurs when price completes the correction and drops again by at least half of the previous bullish wave.

Even with this method, occasional situations occur where price still retraces back to hit SL before continuing downward. Nothing is absolute. However, with this SL-moving approach, over 70% of cases follow technical theory correctly and align well with Elliott Wave principles.

---

For a BUY trade

Everything is applied in the opposite direction.

---

Examples

Example 1: EUR/USD on the M15 timeframe on May 14, 2018

If you sold between points 1 and 2 and price did not hit SL at point 3, then after price dropped to point 5, your position might be breakeven or slightly profitable/unprofitable. After price forms a pullback peak at point 6 and then drops, you should move SL above point 6 (including spread and noise). If the SL is hit, the trade will be breakeven or slightly positive/negative depending on the exact entry.

If you sold between points 2–3 or 3–4, once price forms point 6 and declines, you move SL above 6. This ensures that if SL is hit, you only breakeven or win — never lose.

If you sold between points 4–5 or 5–6, then after price drops from 6 (at least halfway of the upward move from 5 to 6), you still move SL to above point 6.

Example 2: EUR/USD on May 18, 2018

Price dropped from point 6 and reacted strongly around this resistance level, giving multiple opportunities to take profit for sell positions from points 3 to 6.

If price had broken above 6, a W-shaped reversal pattern (with a higher second low at point 5 and additional divergence signals) would likely push price toward point 3. In such cases, an SL at Entry for sells near point 3 would still likely be hit — which is why placing SL near point 6 is a safer long-term strategy.

Of course, there are times when price breaks above point 6, moves higher toward point 3, and then continues downward. That is the nature of the market.

So, if you want psychological comfort, place SL above point 6. If your psychology is strong, keep SL above point 3 as originally planned.

For long-term trading, after each corrective wave completes, shift SL to the next lower swing high. Continue doing this until price officially breaks the reversal pattern, allowing you to exit with strong optimized profits.

---

Final Thoughts

The key point is: Moving SL correctly has nothing to do with your Entry. It only depends on swing highs and swing lows.

Stay logical and use technical structure — not emotions — when adjusting SL.

Thank you for reading. I appreciate your feedback, and feel free to share if you find this article helpful.

Respectfully,

CaPhiLe.com