Stops - Do you trail them?

Do you avocate using trailing stops as a means of locking in profit? Or should you just stick to your targets?

Whats the best way to hold onto winners?

-Guru

 

1) It can be easier when you're onboard a more strongly trending market.

2) It can also be easier to add-on to winners in that type of scenario too.

 

I use them to lock in profits but never to take a loss. I decide when I will lose money, not the market. I think they are extremely valuable tools to use to lock in profits. There's no better feeling than putting in a stop and kicking back thinking, "Ahh....I got $X locked up."

 

Let's take a look at an example:

You buy stock XYZ at 25.00 - your target is 25.50 with a tight .10 stop. At what point would you move your stop to BE. And from there how would you trail it?

-Guru

 

I set stops based on the character of the market and the price action, NOT on where I entered. So I will only trail a stop once the market has broken significantly above the previous high (assuming a long).

I think trailing a stop early, up to breakeven, is a bad idea. You are just as likely to get stopped out prematurely of a good trade.

The basic idea is - if it's a bull market, get long. Exit once it's obviously no longer a bull market, or when it's obviously an insane blowoff top. Your stop for that should be pretty wide, and not based on your entry.

 

I've just started trailing stops to breakeven and am quite happy with the results. I do agree with Cutten that it is not efficient to do so.

Cutten is quite right with his approach, but it takes time to master that type of trading discipline.

Trailing stops works for me because I found it quite stressful seeing a winning position turn into a loser. I am enjoying my trading a lot more now which has to be a good thing.

Also consider how many games of football a team will lose if they never allow the opposition to score a goal.

 

I'm with him on this one.

Before the market turns and hits your trailing stop (unless it's tighter than Lindsay Lohan's jeans) you will have a technical signal to exit the trade at a higher profit. look for the technical exit point.