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The trade goes in my favour to 1.75R, I do not move my stop. I am now risking 2.75R to make 0.25R (11:1 RR).
Statistically speaking, it's absolutely nuts to not move your stop up or take profits to reduce that risk.
Now, you might have backtested or looked at your historical results and seen that you have a 55% win rate for this particular setup. But past performance is not indicative of future results. At any moment in trading, there are an infinite number of unknown variables. If you read Trading in the Zone, all it takes is 1 participant to nullify your entire edge.
So a better option would be to maintain a similar risk profile through the majority of the trade by moving your stop or taking profits, obviously you need to take into account market structure too.
Scaling out + breakeven stop:
1. Enter a trade with 2 contracts, scaling out at 1R and final target at 2R (Initial risk is 1:1.5)
2. Scale out at 1R and move stop to breakeven. (1:1)
3. At 1.75R, my risk is now 7:1 on the remaining contract
Scaling out but do not move stop
1. Enter a trade with 2 contracts, scaling out at 1R and final target at 2R (Initial risk is 1:1.5)
2. Scale out at 1R, stop is not moved (2:1)
3. At 1.75R, my risk is now 11:1 on the remaining contract
Move stop up, no scaling
1. Enter a 1:2 RR trade
2. Move stop up to breakeven after 1R (2:1)
3. At 1.75R, my risk is now 3.5:1
As traders we'll need to accept some form of increased risk even with risk management techniques. The riskiest point of any trade is actually just before it hits the take profit.
You are defining giveback as risk when your risk is still just limited by the original entry / stop loss combination. So it might be helpful for you to think of giveback of potential gain as a separate problem to be solved. You might consider in the hypothetical 2 contract / two target trade that once you have the first fill you move the remaining stop to maintain the original 1:2 RR on the second contract and as a further tweak make the second stop a trailing stop that would then lesson the potential give back.
Of course it's also the point at which, for most people, most of the time, their trade's least likely to go wrong ("the time when they have the highest chance of success", you might call it?).
Unless you test exhaustively (and maybe exhaustingly?) and find the opposite, surprisingly(?) to be the case.
I've done that rather repeatedly.
Very gradually, it starts to seem a little less surprising each time, when the results consistently show that in fact you do better, overall, not adjusting the stop-loss.
It's really very counter-intuitive, exactly as you rightly imply.
But that was what I almost always discovered, anyway.
I'm sure it depends on what you're doing, and how, and that different people discover different outcomes on testing, too.
I know (from my old, long-ago days as a former spot forex trader, betting against counterparty market-makers) that those sort of "brokers" (who hold the other sides of their customers bets trades) absolutely love them to use all kinds of trailing stops and they do everything they possibly can to encourage it.
Which always made me wonder.
A passing thought (which I almost never see discussed on forums, though I think it's at least potentially interesting): "trailing" stops don't have to trail tick-for-tick or point-for-point.
You can do some interesting testing comparing "trailing the stop by two ticks every time the price moves three ticks" and "trailing the stop by three ticks every time the price moves two ticks" and/or whatever other numbers might be appropriate for the kind of trading you do.
