Have been playing with stop losses the last couple of days and have come across an interesting mini-conundrum with stop losses. I'm setting the initial stop loss without a problem (just your normal ATR-based stuff), but have been pondering when to readjust it to a break-even SL. The two options I have seem to be...
A. wait until the stock has moved sufficiently high to reset the stop loss (trailing with the ATR) to a break-even point in one jump (so the gap between price and SL would move out to several times ATR before I did this).
B. adjust the stop loss incrementally from it's initial position as the price moves up (though not readjusting with downwards action) and (hopefully, without too much negative action to get stopped out) maintain a consistent ATR gap until it reaches a break-even point.
Option A seems to leave the gap too wide, but Option B seems to increase the chance of being stopped out if a sudden swing occurs. So I'm bringing this to the experts... anyone willing to share how they handle the initial stop loss to break-even stop loss process?