How to adjust trailing stops?

[Mr Valand]

Hi Guys,

I am currently trading using a demo account with capital spreads. they don't have a trailing stop loss system so i was wondering what an effective method to adjust my stop might be. do i just keep following the price while still maintaining the orignal distance from my entry? do i tighten the stop when i break even? not looking for a crystal ball, but it would be helpful to hear about what methods you use.

thanks,

bhavin

 

[Pazienza]

Hi Guys,

I am currently trading using a demo account with capital spreads. they don't have a trailing stop loss system so i was wondering what an effective method to adjust my stop might be. do i just keep following the price while still maintaining the orignal distance from my entry? do i tighten the stop when i break even? not looking for a crystal ball, but it would be helpful to hear about what methods you use.

thanks,

bhavin

Try trailing under pull backs / over rallies (as appropriate), is probably the most sensible way of doing it.

Or try just trailing under / over every two bars, ie, start trailing after the third bar and count back two every time you get a move in your favour. Sounds a bit asinine, but just try it and see. Cuts your losses and gives runners room very effectively, and it's mechanical. Works very well for indices intraday.

 

[neil]

Try trailing under pull backs / over rallies (as appropriate), is probably the most sensible way of doing it.

Or try just trailing under / over every two bars, ie, start trailing after the third bar and count back two every time you get a move in your favour. Sounds a bit asinine, but just try it and see. Cuts your losses and gives runners room very effectively, and it's mechanical. Works very well for indices intraday.

Good advice - especially for intraday Indices

 

[Pazienza]

Good advice - especially for intraday Indices

It's funny isn't it? I wouldn't have believed it but I tried it after someone suggested it to me and I was pretty blown away. I like the degree of automation involved as well.

To be honest, with index futures it's often not a bad idea to just move to break even and close at the end of the day. I like those markets, nice and trendy intraday .

 

[Mr Valand]

hmmmm... that sounds quite interesting. thought i might have to do some mental arithmetic. will give it a go.

thanks

 

[safvan]

Try trailing under pull backs / over rallies (as appropriate), is probably the most sensible way of doing it.

Or try just trailing under / over every two bars, ie, start trailing after the third bar and count back two every time you get a move in your favour. Sounds a bit asinine, but just try it and see. Cuts your losses and gives runners room very effectively, and it's mechanical. Works very well for indices intraday.

You can get the same results in daily and weekly charts.

Its a good stop mechanism.

 

[Pazienza]

You can get the same results in daily and weekly charts.

Its a good stop mechanism.

 

[timsk]

Hi Mr Valand,
A variation on the theme outlined by Paz' is to use a Renko or Heiken-Ashi chart. With the former, you can wait for a change in bars - i.e. for the first red bar to print in an uptrend and, with the latter, put a stop just below/above the last bar to print. Beware that putting a stop under the low (in an uptrend) on a Renko chart won't work unless your charting package supports Renko with tails. Additionally, to protect the stop from being hit prematurely, you might try moving to a larger box size from the one used to initiate the trade.
Tim.

 

[Pazienza]

One thing I did when formulating my approach was to test and record in real time the results of different exit methods.

So I looked at full exit at my first target, scaling out, manual stop management and trailing as described above. It is a bit of a pain but equally it was well worth doing as it enabled me to prove to myself what worked best for my method.

Scaling out was far and away the worst (for me, it might well be the best for others) and trailing stops in a fairly mechanical way easily the best.

I think it's important to consider the behaviour of the markets you trade though, I have a feeling that trailing the way I've described (this is only based on casual observation) would not be so effective for intra day forex, for example.

 

[Bint_Crusher]

Hi Mr Valand,
A variation on the theme outlined by Paz' is to use a Renko or Heiken-Ashi chart. With the former, you can wait for a change in bars - i.e. for the first red bar to print in an uptrend and, with the latter, put a stop just below/above the last bar to print. Beware that putting a stop under the low (in an uptrend) on a Renko chart won't work unless your charting package supports Renko with tails. Additionally, to protect the stop from being hit prematurely, you might try moving to a larger box size from the one used to initiate the trade.
Tim.

You beat me feckin to it.Renkos rock. Another is to use a 30 min chart with a 30 sma if your package allows it.

 

[Mr Valand]

thanks for those pointers. do you guys ever tighten your stops more once you break even or hit a profit target, but want to let the trade run?

 

[Pazienza]

thanks for those pointers. do you guys ever tighten your stops more once you break even or hit a profit target, but want to let the trade run?

Personally, I never hold overnight, but I am experimenting with doing so. It's a difficult thing to test because it's so discretionary.

Generally, I just trail up until I get stopped out, or close towards the end of the day.

 

[Bint_Crusher]

I move my stops at predetermined taget levels, breakeven is the first.

 

[timsk]

Mr V,
I expect I'll get abuse from all quarters for suggesting this, but it's an idea advocated by Marc Rivalland in his now famous book on swing trading:
Marc Rivalland on Swing Trading
He uses RSI as a tool to take profits. I forget his exact formula, but it's something like take 50% off the trade when RSI breaches 70 (discretionary) and to take everything off when it breaches 85 (mandatory). However, as the legion of critics of indicators will point out - quite correctly - RSI can be in technically overbought territory for a long time in a strongly trending market. So, you need to be very clear about when - and when not - to use it. If you try it, I'd recommend using a higher timeframe that the one your use to enter your trade.
Tim.

 

[Bint_Crusher]

Mr V,
I expect I'll get abuse from all quarters for suggesting this, but it's an idea advocated by Marc Rivalland in his now famous book on swing trading:
Marc Rivalland on Swing Trading
He uses RSI as a tool to take profits. I forget his exact formula, but it's something like take 50% off the trade when RSI breaches 70 (discretionary) and to take everything off when it breaches 85 (mandatory). However, as the legion of critics of indicators will point out - quite correctly - RSI can be in technically overbought territory for a long time in a strongly trending market. So, you need to be very clear about when - and when not - to use it. If you try it, I'd recommend using a higher timeframe that the one your use to enter your trade.
Tim.

Timsk, you are a gormless useless pillock. Anybody who takes yer advice is close to brain dead and to cap it all you are a mod on this site.#
(That enough abuse for you?) whistlingwhistling:whistling

 

[timsk]

Timsk, you are a gormless useless pillock. Anybody who takes yer advice is close to brain dead . . .

. . . and to cap it all you are a mod on this site.#

Hi B_C,
Guilty as charged on the first count, not guilty on the second. I'm afraid you'll have to find an alternative to 'cap it all'. Sorry!
:cheesy: