How to Make a Trade Breakeven

Making a trade breakeven means you reduce the risk of taking a loss on that trade. This can be an important part of our risk management: as long as there isn’t any slippage, the max loss of a breakeven trade would be $0.

This doesn’t guarantee profit, but it ensures that you don’t lose capital if the market reverses against you unexpectedly.

There are two primary strategies to make a trade breakeven: adjusting the stop loss and scaling out to breakeven. Each has its advantages and ideal use cases depend on your trading style and market context.

Adjusting the Stop Loss

The first strategy is to adjust the stop loss to the price which makes your trade breakeven. This strategy is straightforward and typically involves adjusting the stop loss just above your entry price.

Assuming there’s no slippage, it turns the trade into a no-loss scenario. If the trade turns against you, you won’t take a loss.

This can be a great strategy to de-risk your trade. It’s also one of the most common strategies to reduce the risk of a loss on a profitable trade. But that doesn’t mean it’s always the correct strategy for every situation.

Scaling Out To Breakeven

This brings us onto the second strategy: scaling out to breakeven. Scaling out means we close a portion of the trade, and in this case, we close enough of the trade that the profit covers the stop loss.

With this strategy we are keeping our stop loss in the same position, but close part of the trade.

For example, there could be a situation where you want to de-risk the trade, but don’t want to adjust the stop loss yet. One example could be when you’re trading with the trend and your stop loss is based just below the previous wave. 

We know that the trend isn’t broken until the previous wave is broken. But the price may have moved far enough into profit that we don't want to take a loss. At this point, we can close part of the position which covers the stop loss. 

This gives the trade breathing room, and allows it to re-test that area before we’re completely taken out of the trade.