Hello everyone. I'm a long time reader here at ET, but this is my first actual post. I've recently switched from trading options to futures, and have been practicing daytrading the ES 1 contract at a time. So far I've done fairly well. I was wondering if many of you who trade the ES(or NQ, YM, etc) use trailing stops at all? I thought trailing stops might help protect my downside risk when I enter trades and take profits after a good run. I wasn't sure what to set the trailing stop at either. Just from trading during the day lately I thought 2.5 points might be good. What's everyones opinions and experiences?
I've never found trailing stops useful. For my trading I prefer to predetermine a target and as price gets there I examine the trail it painted and decide if I should stop at the target or continue.
Trailing stops are a very bad idea in this market. A particularly nefarious characteristic of the market is too look "great" for these strategies right before their use will kill your account.
In the ES for me it comes down to how I entered. If I am using a breakout of a high after a retracement, that will require a bigger risk to the lows minus 2 tics. But if I have found possible support at an area and buy that area, my risk is but a few tics. As far as once in the trade, I normally have targets, bigger in morning and decrease as day wears on.
The reason I thought about using trailing stops is because I've been trying to trade every turn in the market by reading the price action. Without trailing stops it's worked out great when there's a moderate to large sized move. It doesn't work out so well when the market gets into to chopping and whipsawing though. So, I thought that if I take higher probability set ups for my trades and use the right sized trailing stops that as long as the move goes my way at least a little bit before reversing the other direction I could eliminate most losses of any appreciable size. I guess the other side of that coin would be if I had a good trade going the right direction that retraced just enough to stop out before continuing in the right direction though. But that's why it would important to come with the right sized trailing stop. Not too tight, not too loose. Thanks for the replies so far. Any more thoughts?
Like Nattdog said, trailing stops are a bad idea in this market. Use profit targets, trade consistently and increase size as your account increases. Good Luck
for sp trading, once you are in a trade where exactly u got in should not matter. What matters is your view of forward expectation at that moment. Each moment u are in a trade is (with adjustment made for transaction costs) no different than entering the trade at that moment. If you equity balance and its status becomes a primary tool you use to make buy and sell decisions, most likely you are trading too large for your comfort level. I have seen many traders do this: Exiting on a trailing stop when if they were out of the market, they would be "getting in on a pullback". It is not logically consistent. I suggest getting a few years of data and doing some studies. Before you construct a strategy, doing some data investigation will help you understand the nature of price behavior in this market, which is not always clear based only on visual inspection. After a thorough study on the nature of the market, you then may have some valid information to build a strategy with. A nice starting point is data for the sp and long bond contracts.
"The reason I thought about using trailing stops is because I've been trying to trade every turn in the market by reading the price action." This is like playing poker and wanting to play every hand. No one can win this way. To make money, the primary goal needs to be making money, not trading in and of itself.
Hey Natt. How do you trade for a higher probability of a profitable trade? Fractal chart confluence? Or do you look at something else to give you confirmation of a higher probability trade set up?
Fractals S & R Pivots MA's All of them work some of the time. The idea is to develop a method where you can do the same thing consistently and size up as your account increases.