Trailing stop losses

[shadowninja]

It seems that more and more spreadbetting companies are offering this service. This kind of hints that TSLs are not a smart idea for traders, particularly for swing traders. Potentially highly profitable positions can be closed all too soon if the stop is not wide enough. Of course, if you're near the top and there is enough momentum for it to smash through an all-time high, then perhaps a reasonably tight TSL can help you grab those points before it tumbles.

For scalpers/day traders, TSL can be useful for quickly locking in profit post-news, but generally it plays on the fears of newbies missing out profit so it helps them to close early... and eventually their account will be wiped out by the poor reward:risk ratio.

That's my thinking on TSLs.

Opinions?

 

[strongboes]

I think a stop loss should be set and never moved.

I would use a trailing stop if an open position was in profit but not a set amount away, I personally use a 120 period ma as a fairly reliable indication of when a trade should be closed. Just an indication tho.

 

[Chorlton]

It seems that more and more spreadbetting companies are offering this service. This kind of hints that TSLs are not a smart idea for traders, particularly for swing traders. Potentially highly profitable positions can be closed all too soon if the stop is not wide enough. Of course, if you're near the top and there is enough momentum for it to smash through an all-time high, then perhaps a reasonably tight TSL can help you grab those points before it tumbles.

For scalpers/day traders, TSL can be useful for quickly locking in profit post-news, but generally it plays on the fears of newbies missing out profit so it helps them to close early... and eventually their account will be wiped out by the poor reward:risk ratio.

That's my thinking on TSLs.

Opinions?

IMO The problem with TSL offered by Brokers is that they are only "percentage" based which although are probably better than not having anything, it isn't IMO the most effective way to trail a position.

 

[Joey25]

IMO The problem with TSL offered by Brokers is that they are only "percentage" based which although are probably better than not having anything, it isn't IMO the most effective way to trail a position.

I agree.

The worst example of stop trailing for me is the breakeven stop. If you have entered at or beyond a key level, how can it ever make sense to move the stop to breakeven? I can understand moving the stop to "minor loss" so that you're still leaning on the entry level, but it's normal market behaviour to retrace and test a level, meaning the breakeven stop is guaranteed to be taken out if there is a second test!

Where I can understand the percentage trail is if you use targets for exits and the target is nearly hit. At this point there's no point missing out on 1 tick and coming all the way back for a loss.

Joey

 

[shadowninja]

That's the thinking I've started to develop. I've seen a trailing stop return 10 pips profit when I get stopped out and then watch the price move dramatically in my favour while I sit on the sidelines. I think this is why the likes of IG Index offer it to clients. On the face of it, it appears safe, but in reality it means a winning position gives you very little relative profit.

 

[Joey25]

That's the thinking I've started to develop. I've seen a trailing stop return 10 pips profit when I get stopped out and then watch the price move dramatically in my favour while I sit on the sidelines. I think this is why the likes of IG Index offer it to clients. On the face of it, it appears safe, but in reality it means a winning position gives you very little relative profit.

Definitely. The Turtles did something like Strongboes said. Never moving the stop, instead exiting on a trading signal exit (10-period channel exit)

Phil Newton's excellent thread looks worth investigating aswell. Use 3 lots and close out some of the position part way there so that the initial stop gives a monetary breakeven result if hit, but still offers technical protection.

Rathcoole_exile seems to do something similar, taking it one stage further with staggered stops.

Just shows all the stuff is on this website if you search hard enough!

Do you think these black-boxes are exploiting the trailing stops Shadow?

(Great thread by the way!)

Joey

 

[Chorlton]

I agree.

The worst example of stop trailing for me is the breakeven stop. If you have entered at or beyond a key level, how can it ever make sense to move the stop to breakeven?

Joey

This is something I would disagree with. Personally for me, I want to create a risk-free trade as soon as humanly possible.

If there is a risk of the SP retracing and retesting a particular level then I would personally be concerned with my Entry point.

Just my view....

Chorlton

 

[Joey25]

This is something I would disagree with. Personally for me, I want to create a risk-free trade as soon as humanly possible.

If there is a risk of the SP retracing and retesting a particular level then I would personally be concerned with my Entry point.

Just my view....

Chorlton

My entire method is based on retests, so I can see how we might disagree

It probably is the psychological aspect that makes people use it, which is fine. After all, we're not machines are we?

Joey

 

[Chorlton]

It probably is the psychological aspect that makes people use it, which is fine

Joey

For me its a pure "financial" reason

Seriously, this is why I enjoy Trading. There are so many different successful approaches that one can employ....

Happy Trading......

Chorlton

 

[forker]

trail stop

it all depends on the strategies used in trading where trailing stops comes in. i think news is probably the best time to use this feature but i stay well away from news in general.. i also use the second test as an entry strategy but i do like to lock in profit as price matures in the move. i trail stop behind price structures , i have attached an example of this.

 

[Joey25]

it all depends on the strategies used in trading where trailing stops comes in. i think news is probably the best time to use this feature but i stay well away from news in general.. i also use the second test as an entry strategy but i do like to lock in profit as price matures in the move. i trail stop behind price structures , i have attached an example of this.

Is it easy to show it with candles? These look like swing lows which for a candle would be a "pivot" candle surrounded by 2 candles, each with higher lows. Appreciate it if you can do it.

Joey

 

[shadowninja]

it all depends on the strategies used in trading where trailing stops comes in. i think news is probably the best time to use this feature but i stay well away from news in general.. i also use the second test as an entry strategy but i do like to lock in profit as price matures in the move. i trail stop behind price structures , i have attached an example of this.

By TSL, I am really referring to the automated ones that the likes of IG Index offer.

 

[shadowninja]

Do you think these black-boxes are exploiting the trailing stops Shadow?

I am not so clever as to have an opinion on that. I am just wondering why IG Index has started offering it. They've paid someone to provide that feature. They also offer bungees. It takes development and testing time, which means someone has to be paid, and you don't offer things free of charge in the business world. Just makes me wonder if TSL on the likes of MetaTrader are therefore a bad idea.

 

[Chorlton]

I am not so clever as to have an opinion on that. I am just wondering why IG Index has started offering it. They've paid someone to provide that feature. They also offer bungees. It takes development and testing time, which means someone has to be paid, and you don't offer things free of charge in the business world. Just makes me wonder if TSL on the likes of MetaTrader are therefore a bad idea.

Shadow,

Interestingly enough, my Broker (SelfTrade) has just started offering the same facility.....

 

[shadowninja]

Argh! See! *dons tin foil hat*

As you were.

 

[foredog]

It depends on what instrument it's on, with FX the price is not shown by an exchange so the could manipulate the price easier than a stock where the price feeds from a central exchange.

IG may just be offering it because others do so they need to keep up with the Jones' or lose customers

 

[abaty]

Hi everyone - this is my first post as a newbie.
I tried automated trailing stops when I started Spread Betting but found I was getting whipsawed out too often no matter (it seemed) how far away I put the trailing stop - including MASSIVE gaps up and straight back down on a short position (it is worth remembering that Spread Betting Companies work on their own version of the market which is not necessarily accurate). I will now move my stop periodically manually to lock in some profits but keep it well away from current price. This seems to work better.
I don't personally see the logic in closing part of your position part way. If you identified a target and the trade is still moving in the correct direction, why get out? You might as well trade without a target. Why close out a good trade?

 

[gooseman]

as someone previosuyly mentioned it depends on your trading pyschology. for me trading is about risk/reward and if you can have a trade on with big reward and little (or even free of risk) then you are home free.....

 

[FXSCALPER2]

They are as bad an idea as trading itself.

 

[Trading2k]

I use trailing stops when I have reached my target exit point and there is still momentum in the trade. I generally get stopped out quite quick but as it has trailed past my exit I feel these extra points are the cherry on the cake. I wound never use them as a strategy and agree a stop loss should never be moved (unless you have to).