Should you ever stop a winning trade?

It depends on your win rate.

The higher the win-rate the more you can afford to CUT your winners. This is a complex interaction as the more you cut your winners early.. the more winners youl'l have.

So there's a pretty complex interplay between winrate and risk reward.

Generally you take your risk reward and do this calculation:

(risk / reward ) / 1 + (risk / reward) = Minimum winrate required.

Your profitability in the long term is measured based on how much higher your actual win-rate is compared to the minimum win-rate required.

SO lets say your stop is fixed for simplicity of calculation. That means your take profit can vary and that affects your minimum win-rate required. As you cut profits earlier the minimum win-rate required goes up. You are allowed to cut profits early as long as your minimum win-rate required is < your strategies win-rate.

If you set your stoploss to breakeven the optimal strategy is just let it come back to you. Forever. In the 'longest' run, you will make infinite money (minus commission) as you are risking 0 and having a chance at a non-zero profit which will eventually materialise.

In practicallity this might result in 100 or so trades coming back to you, and one of them running to make 50-100% of your account; Turtle trader style.

/r/Forex Thread