The trader has initiated the trade and determined a stop loss for the trade. The market suddenly moves against the trader and starts to approach the stop loss and the trader is frozen.

He hopes that the trade will recover and fears that the market will take him out and then head upwards. Fearing that he will lose out, the trader decides to lower the stop loss.

By doing so, the trader has committed the serious mistake of lowering the stop loss. Here's why...

Every successful trader must have a stock price that will invalidate the trade strategy. Before entering the trade, successful traders list this price in their trade log. By doing so, the trader has ensured that he will not let emotions influence his market trading. Experienced traders understand the importance of taking emotion out of trades and by doing so, exponentially improve their chances of success.

A trader that has committed this mistake will then stop honoring the commitment of a stop loss and eliminated the best strategy he has for minimizing losses.

Secondly, changing the stop loss is a signal that the trade has not been well thought out and the entry wasn't perfect. Why not recognize the error and exit the transaction quicker rather than later? This is usually the behavior of a trader that does not have a sound trading plan and is trading with hope and greed rather than a sound winning strategy.

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