trailing stop - need some advice and help please

[happyhero]

Hi I have read through loads of posts on here and feel a bit of an amature really with my methods. I use Barclays who took over my Charles Schwab account I used to have to buy and sell ordinary shares and I have been doing it for a few years now. I think I am what you would call a trend trader. I trade on a very simple sysytem compared to what I read on here and seem to do ok, the only trouble is often I will get my pot up and then we hit a bad patch and no matter how I buy and sell to adapt, I seem to watch my pot go down again.

I know I am missing something because I have got board watching my pot hit the same low more or less and then I work to get it up again, back to the same high, which I do seem to achieve but this makes it pretty pointless if I never get anywhere. My theory is if my low is fairly stable all I need is a way to not let it get there anymore and to create a new low that is higher than the usual low. Hope I am not confusing you.

A few years ago I had about £25000 invested in shares and I managed over a few years to increase that to £50000 but now I watch that grow to £60000 and then slowly drift back to £50000 no matter what I do. In that time whether it is rising or falling I do a lot of buying and selling trying to get somewhere. This has happened too many times in the last few years. I want to make some headway, this is why I am now looking at trailing stops to lock in profits.

I have some ideas but I am not sure how to apply the figures for the best result. I am near the high currently and keen to keep it and have set some trailing stops at about 7%, but I have noticed that if you have a bit of a high on any day that I could get knocked out quickly but if I set it at 10% or more then if it starts to fall, I lose quite a bit and if that happens to most of my shares which is often the case I will be near my pot low again.

What I need is someone to guide me how to best use the trailing stops, ie what percentages to use. I have heard how people often tighten the trailing stop as the stock reaches new highs which most of mine are doing now, so should I go tighter? I mean if I can maintain £50000 as my pot low why cant I maintain £60000 as my new pot low, what am I missing? Do I sell everything and start at that figure to make it my pot low, I know that sounds crazy, but there is something in what I am saying. My ambition is to keep increasing my pot so that I can take a little income now and again and still increase the pot over time but as I say I am just on a rollar coaster ride at the moment.

Please guide me how do I make best use of the trailing stops and anything else you think I should consider?

Any advice/help appreciated.

 

[TheBramble]

happy, one method that tends to work quite well is to establish within whatever timeframe you're trading, if the trade you're in, is one you would consider going into if you weren't already.

You'll be out of the trade a lot more than just holding onto it, but you can always get back in, for the small price of spread and commissions. It becomes a series of shorter trades rather than one big one, but you'll potentially lose less on the dealing costs than you will on waiting for that definite end of trend signal that takes a third off what was previously on the table.

But don't take my word for it - forward test it on your next setup either real or paper and check it out.

 

[happyhero]

Cheers TheBramble for the advice, I think I understood what you said, I wrote down on paper an example, I took £1000 and used an example of me investing that in a share and it going up 40% in one year. I tried buying it 4 times in that year each time making 10% as opposed to me buying it at the start of the year and keeping it for the year to make 40%, have I done that right as the first way has come out higher and I cannot quite see why. Sorry if I have done something dumb here, thats the way I thought you do it.

If I am right I cannot see why to keep coming out of a share I would normally keep (because it looks a long term climber to me) should net me more profit than staying in, can you explain this part? And surely if I get knocked out one day on a few peaks happening, if it is a perpetual climber will it not mean I am going to buy at a higher price than I sold at? Can this really be better than not paying the higher price and sticking with it? These questions are confusing me as to what I should do, even though what you say seems to make sense.

Also what percentages should I work on, ie how tight should I go with my trailing stop to lock in profits? Obviously very tight at a time when I am doing well with a share will lock in a nice profit for me but if that share is a climber and at its peak, will it not be a bit silly to buy in again so high? Can you help me get this straight in my head? Can you point me in the right direction with these percentages and tell me why and when I use them so I can understand what I am trying to achieve?

 

[Chorlton]

Hi I have read through loads of posts on here and feel a bit of an amature really with my methods. I use Barclays who took over my Charles Schwab account I used to have to buy and sell ordinary shares and I have been doing it for a few years now. I think I am what you would call a trend trader. I trade on a very simple sysytem compared to what I read on here and seem to do ok, the only trouble is often I will get my pot up and then we hit a bad patch and no matter how I buy and sell to adapt, I seem to watch my pot go down again.

I know I am missing something because I have got board watching my pot hit the same low more or less and then I work to get it up again, back to the same high, which I do seem to achieve but this makes it pretty pointless if I never get anywhere. My theory is if my low is fairly stable all I need is a way to not let it get there anymore and to create a new low that is higher than the usual low. Hope I am not confusing you.

A few years ago I had about £25000 invested in shares and I managed over a few years to increase that to £50000 but now I watch that grow to £60000 and then slowly drift back to £50000 no matter what I do. In that time whether it is rising or falling I do a lot of buying and selling trying to get somewhere. This has happened too many times in the last few years. I want to make some headway, this is why I am now looking at trailing stops to lock in profits.

I have some ideas but I am not sure how to apply the figures for the best result. I am near the high currently and keen to keep it and have set some trailing stops at about 7%, but I have noticed that if you have a bit of a high on any day that I could get knocked out quickly but if I set it at 10% or more then if it starts to fall, I lose quite a bit and if that happens to most of my shares which is often the case I will be near my pot low again.

What I need is someone to guide me how to best use the trailing stops, ie what percentages to use. I have heard how people often tighten the trailing stop as the stock reaches new highs which most of mine are doing now, so should I go tighter? I mean if I can maintain £50000 as my pot low why cant I maintain £60000 as my new pot low, what am I missing? Do I sell everything and start at that figure to make it my pot low, I know that sounds crazy, but there is something in what I am saying. My ambition is to keep increasing my pot so that I can take a little income now and again and still increase the pot over time but as I say I am just on a rollar coaster ride at the moment.

Please guide me how do I make best use of the trailing stops and anything else you think I should consider?

Any advice/help appreciated.

Hello Happy,

IMO I would not use Percentage Stops. From my own research they are one of the least effective ways to manage a position.

Instead, look at stops which take into account volatilty and as such can be trailed closer to the underlying price without being stopped out prematurely.

Also, you could look at something which "accelerates" (ie. gets closer to price) as the time period increases. Similar in priciple to the SAR indicator.

There's plenty of other alternatives/combinations available but the two I have mentioned would probably be a good start.

Ideally, you would want to backtest each one to see how it performs over the long-term on a range of stocks.

Regards,

Chorlton

 

[nine]

There is no simple answer happyhero.

You design a strategy. Typically it is based around a rationale for entering a trade. Part of that rationale says "i want to enter now, but the market will chop back and forth so my entry is still valid even with a bit of chop" ... then you define "a bit of chop" and place your stop beyond that point.

But different strategies will have different stops because the point at which an entry is wrong will vary. Don't place it so close that you're stopped out frequently (for most newbies that is too painful) but it has to be close enough to be sensible.

Later, with experience you will use different stops to when you start.

 

[TheBramble]

Cheers TheBramble for the advice, I think I understood what you said, I wrote down on paper an example, I took £1000 and used an example of me investing that in a share and it going up 40% in one year. I tried buying it 4 times in that year each time making 10% as opposed to me buying it at the start of the year and keeping it for the year to make 40%, have I done that right as the first way has come out higher and I cannot quite see why. Sorry if I have done something dumb here, thats the way I thought you do it.

HH, this isn’t really something you can effectively back-test (I don’t think anything can be effectively back-tested, but that’s for another time). When you look ‘back’ at where you would have exited and entered, your eye will inexorably be drawn the optimum points. Optimisation, curve-fitting, data-mining, doesn’t matter what you call it – it’s human nature. Which is why it isn’t representative of what would have happened in reality. That’s why I suggested you forward test it.

Take a look at your historical trades and all the trends you traded and how much you gave back. If you’re pulling a more than two-thirds the entire trend run, you’re doing OK. Better than most. If you’re not, then the method I’m suggesting may help.

If I am right I cannot see why to keep coming out of a share I would normally keep (because it looks a long term climber to me) should net me more profit than staying in, can you explain this part? And surely if I get knocked out one day on a few peaks happening, if it is a perpetual climber will it not mean I am going to buy at a higher price than I sold at? Can this really be better than not paying the higher price and sticking with it? These questions are confusing me as to what I should do, even though what you say seems to make sense.

If you look at the tip-to-tail of the trend you’re trading it’ll be X pips or points. But you’re not ever going to pull all of that.

If you’re trend trading, you need to identify a trend is in place (up to you how you do that) and that part of the trend is obviously not tradable. For you to exit your trade you have to have some method of identifying the trend is no longer in place (up to you how you do that) and the reversal against your position will take a lump of funds out of your unrealised P/L. You will miss the beginning and end of every trend. No way you can’t if you’re using normal trend following methods.

However, along the way from low to high (or high to low) of any trend there are any number of pullbacks and corrections and rallies. I guess all I’m suggesting is that you use a far finer gauge of when the trade is going against you and exit then, and be prepared to get back in if it looks like the trend is still intact. Rather than use percentage or fixed size stops which guarantee you’re going to lose that much money on every trade, use your trend entry/exit criteria all the way along, but with a much finer (smaller) tolerance for loss. Get back in when the coast is clear.

 

[happyhero]

Thank you for all the inputs here, I am finding this all very interesting and would like to discuss this further if you will indulge me some more, rather than end here if that is ok.

Would you put a trailing stop on a newly bought share as although you do not yet have any profits, you could protect yourself from losing a lot if it suddenly falls thus maintaining your profits on others rather than making on one share and letting this share rip it away from you? It seems that would be sensible to me, do you agree or would you think this is not what I should do? By the same token does it not follow that you should put trailing stops on all your holdings to protect yourself from any nasty losses?

Another thing I find odd is that you mention not to use a percentage, granted I would judge each share on its merits and adjust a fitting trailing stop to suit, but don’t you work out how many pence you want to set the trailing stop at by deciding on a percentage, e.g. I would look at my particular stock that I have, on which maybe I have made 25% so far, and decide to apply a trailing stop at maybe 7% to lock in my profits. Obviously I would translate that to pence as that is the way my account requires it, but the fact remains I used a percentage to work it out. I do not see so well how I could calculate a figure for a trailing stop without using a percentage bourn from looking at recent history movements on the chart.

Finally I give a share that I have as an example, I have shares in Dragon Oil (DGO) and I am currently standing at just over 20% profit, not wanting to lose the profits I am tempted to set a trailing stop at 7% (I even fancy tighter than that perhaps) but if I look back a few days to Tuesday 22nd April, the difference between the peak and trough (I think you call it that) is over 11%, so my stop would have taken me out, yet this share continues to look like a good riser to me, so what should I have done there do you think, (bare in mind that day was probably a little exceptional), should I have stuck with about 7% for the stop and come out and tried to get back in cheap or should I alter my trailing stop to something bigger? Obviously I would convert to pence at 7% and have set my trailing stop to round about 35p.

 

[TheBramble]

Would you put a trailing stop on a newly bought share as although you do not yet have any profits, you could protect yourself from losing a lot if it suddenly falls thus maintaining your profits on others rather than making on one share and letting this share rip it away from you? It seems that would be sensible to me, do you agree or would you think this is not what I should do? By the same token does it not follow that you should put trailing stops on all your holdings to protect yourself from any nasty losses?

If you’re asking me what I do rather than what you should do, I’m happy to oblige HH, but you have to bear in mind I trade the way I trade because it works for me this way, after a LOT of trial and many, many errors. I also likely have very different intent in my trading strategies and a radically different view on R:R and Value and Time to that which you may currently have. So, with all that in mind,

Yes. I always trade with a very tight initial stop. If the trade doesn’t immediately (price & time) go my way, I figure I didn’t figure it right. I’m out. Even if it means going right back in if it gives me another entry signal. I don’t mind taking lots and lots of small, very small, really tiny losses.

Once I’m in the trade, I keep it on a tight leash the whole time. Largely irrelevant to the timeframe I’m trading, I’ll exit at the first sign of any move against me, and get back in if it reconstitutes itself as a valid buy/sell again. I’ll keep doing that all the way up/down. Lots of shorter, smaller trades. Very limited exposure and risk. But I agree with your proposal – stops on entry – stops all the while in the trade. But I think you’re initiating question was on the relative SIZE of those stops. That’s still the question you’re asking. Without stating the obvious ‘only you can decide’ which is obvious, but largely unhelpful maybe the following will go some way to giving you some ideas of a way to approach it.

Another thing I find odd is that you mention not to use a percentage, granted I would judge each share on its merits and adjust a fitting trailing stop to suit, but don’t you work out how many pence you want to set the trailing stop at by deciding on a percentage, e.g. I would look at my particular stock that I have, on which maybe I have made 25% so far, and decide to apply a trailing stop at maybe 7% to lock in my profits. Obviously I would translate that to pence as that is the way my account requires it, but the fact remains I used a percentage to work it out. I do not see so well how I could calculate a figure for a trailing stop without using a percentage bourn from looking at recent history movements on the chart.

Well, that’s one way for sure. But you’re effectively locking in that size loss on every trade. A percentage is an easy option in that you apply it across the board and it takes little effort or time. A possibly more effective method is to look at where the price has been stalling or levelling (Resistance/Support) and use that a fixed stop point. E.G. if you see an opportunity/entry signal to go long a stock at 21.25 and notice the 20.00 level has shown strong resistance until recently, it would be possibly sensible (a few other things considered too) to use that level as your initial stop, less a few pence/cents to avoid getting hit on the level itself. As the price moves your way, move the stop up to just below the last swing low. All the way on up, using that last swing low that gets traded back down through as your signal to get you out of the trade. Actually, your stop will be set there so you’ll be out automatically. That, for me, works a lot better than fixed point or percentage stops as it factors in current action on the stock/instrument rather than any arbitrary amount.

Finally I give a share that I have as an example, I have shares in Dragon Oil (DGO) and I am currently standing at just over 20% profit, not wanting to lose the profits I am tempted to set a trailing stop at 7% (I even fancy tighter than that perhaps) but if I look back a few days to Tuesday 22nd April, the difference between the peak and trough (I think you call it that) is over 11%, so my stop would have taken me out, yet this share continues to look like a good riser to me, so what should I have done there do you think, (bare in mind that day was probably a little exceptional), should I have stuck with about 7% for the stop and come out and tried to get back in cheap or should I alter my trailing stop to something bigger? Obviously I would convert to pence at 7% and have set my trailing stop to round about 35p.

So you bought at the 420 level? Look at the chart. There’s a clear line of Resistance at 420, 450 and 510. It’s not been able to re-test it’s 52wk high at 519 set in early March. Volume is increasing on down moves and not showing similarly enthusiastic momentum on the up moves.

Just my take HH, but if it were me, I wouldn’t be in this trade. But if you’re comfortable that YOUR analysis for longer term gain is still valid, then setting your stop would be better based on those resistance levels than any percentage or fixed point system

 

[Chorlton]

Thank you for all the inputs here, I am finding this all very interesting and would like to discuss this further if you will indulge me some more, rather than end here if that is ok.

Would you put a trailing stop on a newly bought share as although you do not yet have any profits, you could protect yourself from losing a lot if it suddenly falls thus maintaining your profits on others rather than making on one share and letting this share rip it away from you? It seems that would be sensible to me, do you agree or would you think this is not what I should do? By the same token does it not follow that you should put trailing stops on all your holdings to protect yourself from any nasty losses?

Another thing I find odd is that you mention not to use a percentage, granted I would judge each share on its merits and adjust a fitting trailing stop to suit, but don’t you work out how many pence you want to set the trailing stop at by deciding on a percentage, e.g. I would look at my particular stock that I have, on which maybe I have made 25% so far, and decide to apply a trailing stop at maybe 7% to lock in my profits. Obviously I would translate that to pence as that is the way my account requires it, but the fact remains I used a percentage to work it out. I do not see so well how I could calculate a figure for a trailing stop without using a percentage bourn from looking at recent history movements on the chart.

Finally I give a share that I have as an example, I have shares in Dragon Oil (DGO) and I am currently standing at just over 20% profit, not wanting to lose the profits I am tempted to set a trailing stop at 7% (I even fancy tighter than that perhaps) but if I look back a few days to Tuesday 22nd April, the difference between the peak and trough (I think you call it that) is over 11%, so my stop would have taken me out, yet this share continues to look like a good riser to me, so what should I have done there do you think, (bare in mind that day was probably a little exceptional), should I have stuck with about 7% for the stop and come out and tried to get back in cheap or should I alter my trailing stop to something bigger? Obviously I would convert to pence at 7% and have set my trailing stop to round about 35p.

Hello Happy,

Everyone will have a different view on this but these are my thoughts...

Firstly, IMO, EVERY trade entered should include TWO types of stop.

1) An Initial Stop which is used to (i) Calculate your position sizing and (ii) to exit the trade if it reverses immediately.

2) A Trailing Stop, which is used to capture a percentage of profit as the trade moves in your favour. Obviously, the closer the stop is to price the more chance that there is for the trade to be stopped, whereas the further away the more profit you will give away before being stopped out.

In a lot of instances both these types of stops can actually be the same stop.

3) In addition some traders also use a Profit Stop. Although this type of stop can be effective with certain strategies such as Mean Reversal, etc, normal Trend Following strategies IMO shouldn't use one. Others may disagree with this comment so I will try to explain my own reasons.
Firstly, this type of stop will hurt a trend-following system. No one knows where the Mkts will go tomorrow. Consequently, once you have a trade which is profitable you should try to squeeze as much as possible out of it, as in normal circumstances its a small percentage of trades which produce the most winners for this type of strategy. By using a Profit Stop you are in effect restricting this. .

As a side note, the fact that you have asked whether you should use a stop loss on certain trades, I would highly recommend that you read some books on the subject of risk and money management. IMO This will definately help you in the long-term.


I think I should also take this opportunity to explain my approach to trading as this may offer some understanding to the reasoning behind my comments.

Basically, I develop Mechanical models. The risk & type of stops employed is constant and does not alter from security to security. I try to focus on risk and carry out extensive backtesting of my ideas as well as the level of risk and the type of stops I ultimately end up using. I then carry out walk-forward testing as a confirmation as to the robustness of a particular strategy before commiting real money to it.

For me, once in a profitable trade, I do not care how much profit I have made on a certain trade. 10%, 25%, 200%, its all unimportant as long as my stop has not been hit.

When I suggested that you ignore the use of percentage stops I was actually referring to a trailing stop which is “trailed” a specific % away from price. As I have already mentioned , from my own testing, regardless of whether the strategy employed is long or short term this type of stop is ineffective.

It should be noted as well that as I am able to backtest my own ideas, I have the ability to try out and test many many different types of stops and see how they perform. All this can be done in only a few minutes.

For someone without access to these type of facilities, one has to rely on looking as past charts by hand and forward testing by the use of paper-trading. The problem with this approach is that IMO, (i) the amount of charts / trades analysed is normally too low to be statistically beneficial and (ii) can be very subjective as we have a tendancy to see what we want to see and more importantly ignore others things!!!

Apologies for going slightly off-topic here but I felt it was important to cover these points as well...


Regards,

Chorlton

 

[wtrader]

lock in that profit

hey

although i am a currency trader this should apply to your market. once your trade is in profit you trail your stop by hiding it a few pips off a price structure. eg say price is riding higher makes a small dip or something that holds price for a while before it continues. this way you will always lock in profit until your target is hit, if not you either end up getting stopped at your origional stop or at a locked in stop. over time this strategy will push you past your threshold

 

[jhyerczyk]

Hi I have read through loads of posts on here and feel a bit of an amature really with my methods. I use Barclays who took over my Charles Schwab account I used to have to buy and sell ordinary shares and I have been doing it for a few years now. I think I am what you would call a trend trader. I trade on a very simple sysytem compared to what I read on here and seem to do ok, the only trouble is often I will get my pot up and then we hit a bad patch and no matter how I buy and sell to adapt, I seem to watch my pot go down again.

I know I am missing something because I have got board watching my pot hit the same low more or less and then I work to get it up again, back to the same high, which I do seem to achieve but this makes it pretty pointless if I never get anywhere. My theory is if my low is fairly stable all I need is a way to not let it get there anymore and to create a new low that is higher than the usual low. Hope I am not confusing you.

A few years ago I had about £25000 invested in shares and I managed over a few years to increase that to £50000 but now I watch that grow to £60000 and then slowly drift back to £50000 no matter what I do. In that time whether it is rising or falling I do a lot of buying and selling trying to get somewhere. This has happened too many times in the last few years. I want to make some headway, this is why I am now looking at trailing stops to lock in profits.

I have some ideas but I am not sure how to apply the figures for the best result. I am near the high currently and keen to keep it and have set some trailing stops at about 7%, but I have noticed that if you have a bit of a high on any day that I could get knocked out quickly but if I set it at 10% or more then if it starts to fall, I lose quite a bit and if that happens to most of my shares which is often the case I will be near my pot low again.

What I need is someone to guide me how to best use the trailing stops, ie what percentages to use. I have heard how people often tighten the trailing stop as the stock reaches new highs which most of mine are doing now, so should I go tighter? I mean if I can maintain £50000 as my pot low why cant I maintain £60000 as my new pot low, what am I missing? Do I sell everything and start at that figure to make it my pot low, I know that sounds crazy, but there is something in what I am saying. My ambition is to keep increasing my pot so that I can take a little income now and again and still increase the pot over time but as I say I am just on a rollar coaster ride at the moment.

Please guide me how do I make best use of the trailing stops and anything else you think I should consider?

Any advice/help appreciated.

It sounds like you have a really good entry system, but have no exit system. This is very common. The first question I have for you is: Do you have a sizing methodology? In other words how do you decide how much size to put on? Is it based on a percentage of equity? A certain dollar amount?

The problem may not be with your trading system it, it may be with how you size the position. You may want to consider learning how to increase your size when your system is doing well and decrease it when it is doing poorly.

Any way, let me know how you size and I will take it from there.

 

[mp6140]

MP -- unfortunately, if you trade that way, you must live with the rules !

the "standard" in the INVESTING world is to open a trade with a generous trailer (10% easily) and to tighten it as profit increases to (the standard) 8%.

now this is bothersome to me, because it means i am forced to lose 8% of any profit ive attained should the stop be hit. Unfortunately, in this "method" of trading, this is your only choice ---- "buy and hold" means that, and its the reason, unless you modify your "system", youll hardly ever see more than the average DOW profit per year --- its a method designed by the smartest money to give back the least to the "investor" and how institutions make 200% a year and give you 10%, with you thinking it was great !

what bramble suggests is highly valid as a method of trading, ONCE YOU KNOW HOW TO TRADE, and that is the "fly in the ointment" so to speak ! Its based on knowledge of price movement, knowing support and resistance and ESPECIALLY how trends are working either for you or against you.

Unfortunately, unlike eating popcorn or procreational sex, this process takes TIME and EFFORT to learn and a whole lot of EXPERIENCE is probably even more important.

the IDEAL is of course to buy the upside move, exit at the top, short the downside move, exit at the bottom and repeat the process ad nauseum until youre either dizzy or bored or both --- then you take profit. As bramble points out, the ideal is not always attainable, although sure pretty on a chart !

I love forex over stocks because forex is perhaps the MOST reliable trading instrument when it comes to plotting out its progress and movements ---- FAR better and easier than stocks, and the costs are "tremendously" less, since the bank gives you free loans (margin) so you can increase your profits (assuming profits of course !)

while margin is a two edged sword, there are plenty of posts examining the pitfalls, so we leave that discussion to other times, BUT returning to the task at hand, forex simply gives you more bang for your buck, and a far easier instrument to trade using the methods you use.

so, in my mind at least, because of the time factor for profit on stocks and the attendent ups and downs which simply eat into your profits until the stock moves past your past profit points, forex is a far far better choice --- so much better that i left a rather successful stock trading practice to settle on forex only --- once done, I never looked back at the comparitively poor performance of stocks !

forex resembles, what we always called in the equity world, "channeling stocks" ---- reason being they move up and down, in reasonable predictable fashion, within a "channel" (which to me is the LRC channel) and in equities that was always considered as the ULTIMATE in trading --- well forex does it every single day, day in and day out, week after week, month after month, and year after year !

think about it --- theres new learning to be done, but the rewards far exceed the troubles of all the research, the ups and downs and the "concepts and stories" that drive stocks forward (or back, for that matter !)

enjoy and trade well

mp

 

[combotrader]

HH

Bramble and MP are giving you sound advice here.
If you dont work in the financial industry ( or even if you do) read Van Tharp`s book : Trade your way to financial freedom. I would also say look at commodities and bonds - much better at obeying s/r and doing what you want them to do. Theres too many people playing the stocks game..

MP - what do you mean by LRC channel ?

Thanks
CT.

 

[Chorlton]

MP - what do you mean by LRC channel ?

CT,

I would suggest he is referring to the Linear Regression Channel.

Regards,
Chorlton

 

[mp6140]

HH

Bramble and MP are giving you sound advice here.
If you dont work in the financial industry ( or even if you do) read Van Tharp`s book : Trade your way to financial freedom. I would also say look at commodities and bonds - much better at obeying s/r and doing what you want them to do. Theres too many people playing the stocks game..

MP - what do you mean by LRC channel ?

Thanks
CT.

=======================================================================

hey

bramble and i have signed the contracts and where taking our standup routine on the road ----- heck, even if just based on being banned, were a natural together !

LRC = Linear Regression Channel as stated by Chorlton. Without going into all the fancy crap that no one has any use for, its a set of three lines (top, middle and bottom) that show historical (and therefore anticipated) support and resistance for the timeframe youre charting.

LRC's are "essentially" top and bottom trend lines, with a middle line, laid as a parallel channel --- as you look at one, you immediately see if the trend is UP or DOWN, which alone is worth the price of admission, but WAIT theres MORE !

there are channels that move with the rising prices (or falling) and those that DONT move, the later showing you how far the price has extended past the channel, and the former showing historically where the prices have gone --- i use both !

since channels act in many ways like bols bands, if a price breaks the channel it can mean a simple break and reverse back down quickly OR, a NEW TREND has come to life.

Channels have qualities that one can use fully in trading and one of their most important roles is showing the TREND in major VISUAL fashion, so a glance is all one needs --- there are many other rules of LRC, with the second being support and resistance as you can see from the attached ---- notice at the top right of the chart, the price rose to the top of the new, small channel and then BROKE OUT --- needless to say, once the break was confirmed as solid, a LONG entered at that point was kinda nice --- shucks, even nicer if you had it from the beginning of the move !

anyhow, thats pretty much it

mp

 

[combotrader]

Thanks. There are so many channels these days - I was wondering if there was a linda raschke channel !!

I realise that one gets the middle trendline with the least sqares method. The top and bottom line are 2 standard deviations apart from the midline, usually, but not always ( ala bol bands) - is that right ?

Ta.

 

[Pat494]

All good points above HH to evaluate
You may wish to also consider your psy internals e.g.
1. how greedy you are for profits - smaller trailing stops etc. ?
2. how fearful you are of making a complete balls-up and losing a sustantial portion of your funds ?
3. how patient you are - can you bear to watch the price crawling up and down so slowly ?
4. how confident you are in your own abilities ?
5. are the feds and politicians doing a good job currently ?
6. how resilient you are to a loss ?
7. is there peer pressure ?
8 and any others

 

[wtrader]

guys lets not drive this poor fella to confusion. locking in profit isnt rocket science and there are a number of simple methods to do so but it all depends on your time in the market.

 

[mp6140]

Thanks. There are so many channels these days - I was wondering if there was a linda raschke channel !!

I realise that one gets the middle trendline with the least sqares method. The top and bottom line are 2 standard deviations apart from the midline, usually, but not always ( ala bol bands) - is that right ?

Ta.

===============================================================

i dont believe Ms. Raschke had ever patented a particular channel --- at least of not yet heard of it ! No ---- wait . . . . . . . I think she used price channels !

I use 2 standard deviations and 1.7 depending on the band --- if one wants to get really fussy, the band should be "custom fit" to each individual currency pair, which would then vary from 1.5 - 2.2 approx.

enjoy

mp

 

[wtrader]

===============================================================

i dont believe Ms. Raschke had ever patented a particular channel --- at least of not yet heard of it ! No ---- wait . . . . . . . I think she used price channels !

I use 2 standard deviations and 1.7 depending on the band --- if one wants to get really fussy, the band should be "custom fit" to each individual currency pair, which would then vary from 1.5 - 2.2 approx.

enjoy

mp

one can also use the andrews pitchfork which is legendry in its accuracy