Let's you are short and the price series is trending down, except a few upgoing spikes. If the spike is sufficiently large, your trailing stop will be triggered and you will exit the short trade, but the "short" signal is still there and continues to be effective... My question is: what's the best way to reenter the short trade? Thank you!
If you still have a short signal why exit the trade or trail a stop? It seems as though your dilemma is occuring because you are trailing a stop and getting stopped out when you would in fact still like to be short if you were not in the trade. If this is the case your method might contain an inherent contradiction. This often occurs when one uses a trend following exit with a swing trading entry.
I can't tell you the "best way" because I don't know every possible strategy, but I can tell you my way of thinking about it. Assuming I want to be short, I won't just jump back into the market because "trade position" is as important to me as trade direction. So I'll look for a pullback near a key S/R area that I've located using market profile and volume analysis. Even if I get a pullback, I won't re-enter the trade unless I can "position" the trade near a key S/R area so the Reward/Risk ratio is in my favor. I'm a selective trader, taking only about 3-4 trades a day. More active traders may take a more agressive re-entry approach. I'll be interested to hear what they have to say.
If a market is in a decline, and a trader is short there is no point in selling again from the beginning because a trader will not be accomplishing anything of greater significance, certainly not a greater advantage, besides what would be the point in being exposed to risk again if a market is an obvious decline already? I have to assume that mizhael is inexperienced, traders that are new have a tendency to approach the markets in a manner that is not advantageous whereas traders with experience approach the markets in a manner that is advantageous, traders that are inexperienced also tend to work work a lot more or create a lot more work than what is necessary.
Here you go, you just descibed how losers operate. In contrast, a winner who is sure about his position will add more to his short at the top of the spike. A loser will exit and fearfully watch the market going through his original entry price gain before considering another short, meaning that he took a loss, although he was stupidly correct about the market. Yeah, this is how they take your money, exactly how you described. Make price move down, distribute, spike, accumulate, and so on...
i don't use trailing stops but i am sure they have their place in some successful traders' arsenals. in this case, it seems as if the trailing stop was not your friend. i am guessing that you have a normal job and swing trade thus can't be watching as often as you would like which is why you feel the need for the trailing stop? regardless, you are out of the position. i would just consider that trade done and look for the next entry signal on the same instrument, whatever you use to indicate such and go from there. i would definitely not chase the market and if you happen to get that next signal at a worse price than you got stopped out or it is in the opposite direction, it doesn't matter. a signal is a signal, take it. oh, if possible, try to come up with some sort of good exit indicator/signal beyond the trailing stop, be it price action, pivots, S/R lines, TA, whatever.
There's a difference between an "initial stop/loss" and a "trailing stop". Some traders use the term "trailing stop" as a stop/profit. For example, you're short at 10.0 with a stop/loss @ 11.00 and the price drops to 8.0 then you move your stop/loss into a stop/profit @ 9.00 and then price spikes back upwards (counter-thrust) and hits your stop/profit (the trailing stop) for a 1.00 profit. Regardless, if your stop is hit as a loss or profit...if the price action is still signaling short to you especially in the same general price area as the prior short...GET SHORT. Thus, if there's not another short signal...there's no reason why you should get short again. However, if your question is about what will tell you the counter-thrust (you called it "upgoing spikes") is going to fail and then the downtrend resumes... There's lots of trade methods discussed in the sections here at ET in the "Technically Speaking" threads @ http://www.elitetrader.com/vb/forumdisplay.php?s=&forumid=32 for you to try. Mark
There are as many trading styles as there are traders in any single market, but there's only one market. Knowing your market and it's "normal price rotation" is most helpful in the situation you've described. I like VWAP along with Std Dev Bands to get a read on where prices are in relation to historic S/R levels. Prices often pause at Std Dev levels and consolidate, during normal price rotation. Many times prices will retrace to previous Std Dev levels before advancing to higher or lower levels. Here's a tip if you're new to VWAP and Std Dev Bands, you can use these levels for targets entries and stops (if your account can sustain the spreads), but first get to know your market's nuances and characteristics.
Having no strategy is the best strategy in trading. it's my lesson that i have learned from the best. just make what you feel it right
Maybe pyramid on the short signal adding linearly to your position. ie. add 1 additional contract every 4 ticks... Set a sufficient take profit stop to capture the move. Evaluate your signals, start fresh and play accordingly.