Trailing Stops

Discussion in 'Order Execution' started by Trend Fader, Jul 28, 2002.

  1. I have read many traders on this thread talk about using trailing stops. I am curious as to how you come up with your trailing stop algorithm. Is it based on volatility, pure gut, ranges?? Do you just place the trade then let the trailing stop do the rest? Do you tighten the trailing stop as profits increase??

    Please do share...

  2. gnome


    ALL stops are arbitrary. If I'm long, I like to either set a certain point stop or a reversal big enough to call into question the short-term bounce... like the "last dip low", or breaking a prior support pivot. Vice versa for shorts.

    You should NEVER TRADE ANYTHING where you don't know it's characteristics. Pertaining to stops, you need to know how much it can fluctuate without changing trend... I call that "normal noise oscillation range"... everything has one. "NEVER risk more than 1/2 range on anything" is a rule I think should be cast in stone.
  3. gnome,

    Right.. that addresses the stop loss part of it. But what about knowing when to take a profit once your trade is in the black?

  4. gnome


    That's a function of your style. If you want to "let 'er rip for maximum possible gain", I think you need to ride out at least the 1st dip and hope it's less than 1/2 range. As a general rule, no dip in an uptrend should take out the prior dip low... so that can be your profit taking stop.

    I don't trade that way. I look for when the ST move might logically be done... like rally up to resistance, overbought oscillator or something. Sometimes the market turns down "early" and I don't get a shot at selling into my target. Then I have to just guess.

    If you're a technical trader, usually fading, I think you know beyond which you SHOULD not press your position on this trade. Try to sell into that and go on to the next trade. Profit taking is usually arbitrary too.
  5. This is my basic plan...

    I trade the ES emini 10 or 15 times a day.

    Say the market's at 800.00 and I decide to go short.

    I get a fill at 800.00 and I place a stop (mental) at 801.50.
    That's 6 ticks of risk or $75.00

    I keep my stop in place until the market either stops me
    out or trades at 798.00 (2 handles)

    If the market touches 798.00, I lower my stop to
    799.75. That's breakeven plus 1 tick to cover commish.

    Since I'm risking 6 ticks, that means I need to try and
    capture 18 ticks for a 3-1 trade ( 4.5 handles)

    Say the market goes to 797.00. I've got 3 points profit
    ($150.00), but we're not quiet to my objective of
    795.50, yet.

    I pull my stop in a little tighter now to 798.50 (6 ticks)
    and try to lock in some profit ( $75.00)

    Now, from here on out , with the market at 797.00, every tick the market goes down I lower my stop a tick to keep the
    spread at 6 ticks.

    If I have a good trade and the market reaches 795.50 before I'm stopped out, I ring the register and look for another

    Hope this helps and good luck
  6. MIKE-

    I set my trailing stop @ .15 and let it go. In most cases I get out before it is triggered. However, there are times when the market is too fast and I can't act quickly enough so the stop is triggered. I'm a momentum trader and this seems to work well for me.
  7. Miki


    Breakout, we seem to have the same strategy.

    The only difference is that I trade NQ and my IB stops are entered straight away and managed (altered) by me while monitoring the tape and charts.

    Good trading

  8. me sometime and maybe we can trade some
    charts and ideas.:cool:
  9. Miki


    I am told that EliteTrader chatroom is good place to meet.


  10. Okay...hows lunch sound?:D
    #10     Aug 1, 2002