Trailing stop-loss

[JTrader]

http://www.learnmoney.co.uk/spread-betting/stop-losses-7.html

Trailing Stop Losses - Explanation

* A trailing stop is where you move the stop level higher as the underlying stock or spread bet instrument moves higher
* If you were using a 25 point trailing stop loss on the FTSE 100 and you buy at 4200, the stop loss is 4175
* The index then moves up to 4250, and so you move the stop loss up to 4225
* The index then falls back to 4235 before powering ahead to 4300, and the 25 point trailing stop is now 4275 and so on

TOP 3 STOCKMARKET SEARCHE

Hi

by definition, with a Trailing Stop Loss of 80pips -

eg. 1 -
short EURUSD at 1.3307. Price falls to 1.3306, then reverses to 1.3386. TSL80 should DEFINATELY be activated at 1.3386. Does this make sense?


eg. 2 -
short EURUSD at 1.3307. Price does not fall any lower than 1.3307 but then reverses to 1.3387. Should the TSL80 be activated at 1.3387, because price didn't drop any further than/after the entry price, before reversing 80 pips.
Therefore does price need to advance in the direction of your trade by one or more pips (1 pip down if short, or 1 pip up if long) before reversing to the TSL level, in order for the TSL to be activated?


Thanks a lot.

 

[options]

JT A trailing stop loss for longs say.

If you have it set 50 points/pips away from your entry price and market goes up 200 points, your stop loss would go up the same amount so it is still the same 50 points/pips away.

If the market then tanks 400 points. your stop loss doesn't move but you would get taken out 50 points/pips away from your high point.

Just the same as doing it by hand, but each point/pip it goes up your stop loss will follow by the same distance. When it starts coming down, your stop loss point does not move.

It could come down to within 5 point/pips of your stop, then shoot back up again and your stop would follow once it got past the 50 point/pip gap. If it went 5 points/pips past your stop loss on the way down, then you are out of the trade.

 

[JTrader]

Thanks options.

In my example 1 above, the TSL80 from a short trade should have been activated, as price declined 1 pip further before reversing 80 pips.

But in this short trade example, price didn't decline any further from the point of entry, it reversed immediately by 80 pips. Should the TSL 80 have exited the trade for me, or would i have been relying on my (lets say) 200 pip SL, due to the fact that after my entry, price immediately declines, and didn't advance in my favour by 1 pip or more?

eg. 2 -
short EURUSD at 1.3307. Price does not fall any lower than 1.3307 but then reverses to 1.3387. Should the TSL80 be activated at 1.3387, because price didn't drop any further than/after the entry price, before reversing 80 pips.
Therefore does price need to advance in the direction of your trade by one or more pips (1 pip down if short, or 1 pip up if long) before reversing to the TSL level, in order for the TSL to be activated?

Cheers.

 

[JTrader]

My programmer is suggesting a TSL80 works as follows -

programmer -
80 pip trailing stop works as follows :
- it is activated when trade is +80 pips in profit (SL is set to breakeven)
- when trade is +81 then SL=+1 pip
- and so on

this is common approach - you have initial SL and TSL is used to protect
profit.

This is a different understanding to mine of a TSL.

As i see it, if price goes eg. +7 pips in my favour after entry, and then reverses by 80 pips, my TSL80 should exit me from the trade at -73 pips (+ spread).

Who do you think has/is using the correct, or most widely used interpretation of a TSL, me or the programmer?

Thanks.

 

[JTrader]

http://www.xtfx.com/forex_trailing_stops.php
http://www.forexhsi.com/ddhelp/trailingstoporder.php
http://www.compassfx.com/compassfx/

These sources all back-up my understanding of a TSL.

A TSL as i want/understand it should be noth an SL & TSL.
if my trade goes into profit by 1 pip, before reversing 80, my TSL80 sould exit for -79p (+spread).
If my trade reverses imediately after entry, and never went 1 pip into profit, my TSL should exit for -80p (+spread).

Basically my understanding of a TSL is more flexible & dynamic than his IMO, as it will lock in profits more readily!

 

[Pat494]

My programmer is suggesting a TSL80 works as follows -



This is a different understanding to mine of a TSL.

As i see it, if price goes eg. +7 pips in my favour after entry, and then reverses by 80 pips, my TSL80 should exit me from the trade at -73 pips (+ spread).

Who do you think has/is using the correct, or most widely used interpretation of a TSL, me or the programmer?

Thanks.

Ideally I think you are right at -73 pips. However I dont know of any spreadbetter who will give a trader a trailing stoploss such as this. This is basically his golden card to make profits.
Yesterday for instance I was well in profit on the CAC and Nikkei Sep futures but got stopped out on both this morning. It leaves me wondering whether
1.I made the stops too tight and got stopped out early or
2.should I have had wider stop losses and risked more profits evaporating.
3. I have even contemplated not having a stop loss except a mental one after the sessions trade, which could be very expensive.
Anyone care to comment ?

 

[dcraig1]

http://individuals.interactivebrokers.com/en/trading/orderTypesMatrix.php?ib_entity=llc#trail

 

[Pat494]

http://individuals.interactivebrokers.com/en/trading/orderTypesMatrix.php?ib_entity=llc#trail

OK IB is the exception but the large deposit etc. puts me off them

 

[peto]

OK IB is the exception but the large deposit etc. puts me off them

IB is a broker, not a spreadbetting company. Therefore it is not an exception, in the context of your original statement.

Trading direct access permits use of many and various 'front end' programs. The possibilities of a TSL are thus limited only by the imagination of the programmer.

A program I use allows the stop loss to commence moving at any given level of the instrument being traded, and the initial trail position may be set to any level above the original stop. Therefore all the possibilities you've discussed above are possible.