Volatility-Based Stop Loss for Trading ES / YM

Discussion in 'Index Futures' started by andysmith, Aug 23, 2005.

  1. Is anyone using volatility-based stop losses or trailing stops to trade ES or YM?

    For example, initial stop loss at 2*ATR(10), breakeven at 0.5*ATR(10), trail with 1.5*ATR(10)?
  2. Well, 83 views and not one post?
  3. never used volatilty stop losts,
    The best method is to use your reversal signals as stop losts after breakeven point :)
  4. "The best method is to use your reversal signals as stop losts after breakeven point"
    -- yes, for daytrading not for trend-trading.
  5. Alexander Elder does a review of this approach in his books...
  6. I use it all the time. It really helps my P/L http://www.trade-ideas.com/Help.html#TSSU

    You can apply that to any instrument. Good luck :)
  7. Candletrader,

    "Alexander Elder does a review of this approach in his books..."
    -- yes, I've read Elder's books, along with LeBeau, Tharp and others. A ratcheted trailing stop based on volatility has worked for me in equities.

    But I recently started reading this Futures forum on ET and it seems most don't use this approach (or don't discuss/post about it), and I cannot figure out why.

    I did find a reference to volatility-based stops on TriPack's journal on ET from a few months ago but it seems they serendipitously stumbled onto volatility trailing stops.

    On the whole, I'm surprised. I would have thought futures traders were much more sophisticated than equities traders (like me)... but so far that's not what I'm seeing.
  8. More sophisticated does not necessarily mean better results. I let the market determine my targets and stops for the day on my futures trades(Day trade only). Equities, I use a broad based dollar stop.

    Short term trades, I use a dollar stop.

    These approaches have served me well.

  9. Mike,

    Regarding multi-day positions (i.e. not daytrading) I believe volatility-based stops have been shown time and time again to be superior to dollar stops given that volatility stops adapt to changing market conditions.
  10. Perhaps you could point me in the direction of some of this research. I use current VOL for today's trades, but I am not sure that the results I would get on my swing trades would be improved. I am always open to improving my game.

    Good trading!

    #10     Aug 24, 2005