Breakeven: This refers to a point at which an investment will result in neither a gain nor a loss, but rather, you'll break even. In Forex trading, once your trade moves in your favor to the extent that the trade's profit matches the risk originally taken, you can adjust your stop loss to your entry price (i.e., the breakeven point). This ensures that, even if the market reverses, you will not incur a loss from this position.

Example: Suppose you buy EUR/USD at 1.1200 with an initial stop loss at 1.1150. If the price moves to 1.1250, you're at a gain of 50 pips. You could then adjust your stop loss to 1.1200 (your entry point), thus making the trade breakeven.

Pros of using breakeven and trailing stop loss together:

1. Minimize Losses: Once the market price moves favorably to reach your breakeven point, you're no longer at risk of a loss from that trade if the market reverses.
2. Protect Profits: A trailing stop loss helps secure the profits you've already made. If the market continues to move favorably, the trailing stop moves with the market, increasing your potential profit.

Cons of using breakeven and trailing stop loss together:

1. Early Exit: Markets don't move in straight lines. Temporary reversals might trigger your stop loss prematurely, causing you to exit before your profit target is reached.
2. Missed Opportunities: Once a stop loss is hit, it takes you out of the market. If the market then moves in the original direction of your trade, you'll miss out on those gains.
3. Breakeven doesn't account for transaction costs: Breakeven points do not take into consideration transaction costs like spreads or commissions. Therefore, even if you set your stop loss at the breakeven point, you could still end up at a small loss once these costs are factored in.

Example Setup:

• Profit Distance 1: 20 pips
  • StopLoss Adjustment: Move stop-loss to -10 pips (10 pips below entry point).
• Profit Distance 2: 30 pips
  • StopLoss Adjustment: Move stop-loss to the entry point (0 pips).
• Profit Distance 3: 40 pips
  • StopLoss Adjustment: Move stop-loss to +20 pips (20 pips above the entry point).

Example Scenario:

Suppose you enter a trade at a price of 1.2000:

• When the price reaches 1.2020 (20 pips in profit), the stop-loss will be adjusted to 1.1990, securing a potential loss of only 10 pips if the market reverses.