Stop, target 1, 2 and 3, where 1 is just catching a high win rate, 2 a target that make sense (s/r for example) and 3 is a kind of if the trend is not broken, stay in the trend. Also a trailing stop works best with a re entry, where the trailing stop is the setup for the re entry.
If for example you have a trailing stop with some kind of level, you could make that level a setup for your trigger to re enter the market. You just have to have an universal trigger like a new high or somethings else that occurs often.
The figures on hedge fund returns are decent. Once in a while, they have 1 or 2 losing years but, other years they are profitable. I am referring to the figures on Michael Covel's Trend Following book. This figures based on the hedge funds using trend following to trade the stockmarket with trailing ATR stop losses. There are drawdowns and losses but, overall the returns are decent. William Dunn and John Henry among those featured in the book.
In my opinion, for the majority of traders, it is best to place a simple price target based on price action/charts, etc. However, traders always focus on that one insignificant (statistically) trade was a home run, and they took only 5-10% of the move or less. Or, they enjoyed the significant move, and now they try to replicate it. This leads to "I'll max it out next time," and then from a trader, you turn into an artist of "let me try." If the market is still trending in one direction in a big way, look to reenter and exit multiple times. Even if you were stopped and the probability is in the trend, you should consider entering again. I am not against SD, ATR, or % based stops because their logic is based on volatility. If it suits anyone's method, I can never argue against positive and consistent results.
Still quite not sure your meaning, lets say price dropped thru support then broke through upside again, you think this could be buy signal? There is an issue with this method and its chop. In a crabbing market this sort suffers badly. An exit signal should never be used as an entry method. For example on my old Amibroker model of a trailing % stop, an example of a 5% trailing stop on an uptrend did not equate to use a 5% trailing stop on a down trend. A buy signal imo should have a logical reason as a buy, but that reason doesn't fit it as a sell signal and vice versa. Buy signals and sell signals are two different fish.
Downside >>>> Gotta keep looking at charts, it becomes subjective, it becomes discretionary, every trade is a different stop which needs 'looking' at again and again. A stop which can run off data is prefered imo and is also recognized on a chart and plotted as an indicator if that's what you want. I prefer trading off data, not charts as data covers a wide field of the market, well, in my instance which is stock trading, I follow about 1000 stocks.
My method is simple enough (for swing trades): 1) Sell a portion on a gap-up or when price pushes too far above the 10 period simple moving average without a pullback (this second bit is subjective). 2) Sell a portion or remainder (again, the choice of which is a bit subjective) is if we get 2 closes below the 10 period SMA on daily. Works really well for me anyway.
MA's are ok, better than nothing, but if for example you entered a position at the very bottom of a trend, then it would take maybe several days for the MA to display a clear signal. I've looked and used MA's heaps, they are not ideal. Here is SP500 just for an example. In my opinion, a good stop system is just darned hard to find, they have lots of issues which require tweaking most often subjectively depending on the price value of the instrument and volatility which is partly to do with the price of the instrument (think 5c stock versus an 5000 point index) and market mood conditions - tops, bottoms, midtrends, time of the year. I'm happy to say I have strong conviction there is an ideal stop which I've worked out which overcomes these problems. The reason for the thread was several fold, do traders on ET as such struggle with Stop System method? Is a good system marketable and in demand? Do traders want a simple system which can be used without forever tweaking and being subjective? Would they appreciate a system which is user friendly and useful right across the board re price values? A system which can be visually seen on charts as an indicator or coded without hassle (depending on your maths skills) onto spreadsheets. By the way, coding can be done for those with no skills, eg, knocking up code is like me giving a formula, once you have it, just copy and paste it. Every charting package would need its own formula obviously as what you'd code into Amibroker is not the same for Sierrachart.
For spreadsheets/Excel/Googlesheets, one formula does 99% of all the heavy lifting. For a fully automated system, eg, switch on the sheet or charting program and have no input yourself, you would need 2 formulas, the 2nd one is a bit more complicated as it needs to count back the minimum amount of bars the stock has traded and number crunch around that figure. My opinion, unless your positions are rapidly changing in number/turnover and or you trade stock quantities into high double and triple digits, forget about the 2nd formula.