Trailing Stop Loss

[TabJockey]

If he halved his stop at 2R it would still be at 1 ATR below entry and he would be giving back 2.5R when that stop is hit.

Did you even read my ****ing post? tightening, trailing stops.

Yeah I have manually back tested 2 x ATR stops at buy, 1 x ATR stop at 3R and then .5ATR stop at 4R. 1xATR works pretty well, it does not really trim my wins by too much, but the .5ATR stop definitely does.

Another thing I was looking into, because I always sell on the open, sometimes I miss great instraday opportunities. Putting a conditional sell in at 5R at open from the onset has interesting results...expectancy drops a tini bit, but expectancy PER DAY rises by quite a bit.

Try testing out some different values for your own system to see what works best, are you manually back testing or amibrokering it?

 

[pavilion103]

Did you even read my ****ing post? tightening, trailing stops.

Yeah I have manually back tested 2 x ATR stops at buy, 1 x ATR stop at 3R and then .5ATR stop at 4R. 1xATR works pretty well, it does not really trim my wins by too much, but the .5ATR stop definitely does.

Another thing I was looking into, because I always sell on the open, sometimes I miss great instraday opportunities. Putting a conditional sell in at 5R at open from the onset has interesting results...expectancy drops a tini bit, but expectancy PER DAY rises by quite a bit.

Try testing out some different values for your own system to see what works best, are you manually back testing or amibrokering it?

I use Amibroker to do my explorations to scan stocks.

As far as testing goes I am manually testing. This is because enter based on technical indicators (looking at Volume Spread Analysis at the moment) and am a discretionary trader.

I've only been trading a sim for a month. What I have also started from tonight is going back to say 12 months ago for example and entering trades based on the signals I am getting now and then using the "bar replay" function to see how the trade pans out.

Any suggestions?

 

[TabJockey]

Rightio, I love manually backtesting bar by bar. I am working towards a 90% mechanical system so I probably cant help you much with what you are doing.

 

[pavilion103]

Rightio, I love manually backtesting bar by bar. I am working towards a 90% mechanical system so I probably cant help you much with what you are doing.

No worries mate. I'm getting a feel for the market and price action at the moment so toughing it out. I will also begin working on a manual system in time, as I want to have multiple systems.

Thanks for the help with the trailing stop though. I think that will make a big difference for me.

 

[pavilion103]

I am looking to place my trades in the last 30 mins or so of the trading day. Do you think I should set a stop loss, which if activate during the day, then I am stopped out? Ot should I wait until the end of the day and only stop myself out of it closes below (or above for short) the stop?

This is what happened today in my sim.

 

[tech/a]

I personally use the close for EOD trading.
If Im monitoring a stock which has a weak pattern and it breaks that pattern intra day (Which is my stop loss---I dont use an indicator) Ill sell as soon as its violated.

You'll find you get swings and roundabouts.
Some like today may continue.
Others will fall lower before you sell at NEXT open.

But until you test your method over 1000s of trades as in systems test it.
You wont know.

 

[TabJockey]

I am looking to place my trades in the last 30 mins or so of the trading day. Do you think I should set a stop loss, which if activate during the day, then I am stopped out? Ot should I wait until the end of the day and only stop myself out of it closes below (or above for short) the stop?

This is what happened today in my sim.

View attachment 42394

You need to have stops active all the time to stop yourself getting wacked by unexpected news. You might have great success for a while deciding only on the close prices but you open yourself up to the risk of a bad 1 day drop.

The way I look at it you have to set a limit to your risk at all times, then the only thing that can get you is gaps. Capital Preservation at all costs!

also remember trailing stops never go down, they lock in place like a ratchet, so in that trade you posted you still would have captured a good part of the trend, I would consider it a success. If you get >50% of a decent move its a success in my books.

 

[TabJockey]

And another thing, have an exit plan that isnt your stop. For example in one of my systems I sell on the open after the first MACD tick down which is usually the top of a down day, and close to yesterdays close. I have tested with profit targets but I find that it always reduces expectancy for me. Nothing like a 50% windfall once in a while but if you have a conditional sell at 20% profit you never get there.

 

[pavilion103]

You need to have stops active all the time to stop yourself getting wacked by unexpected news. You might have great success for a while deciding only on the close prices but you open yourself up to the risk of a bad 1 day drop.

The way I look at it you have to set a limit to your risk at all times, then the only thing that can get you is gaps. Capital Preservation at all costs!

also remember trailing stops never go down, they lock in place like a ratchet, so in that trade you posted you still would have captured a good part of the trend, I would consider it a success. If you get >50% of a decent move its a success in my books.

What do you think about having a wider intra-day stop, which will be activated if things really start to get messy, but then have my regular end of day stop which I execute on the close?

This will obviously ensure I protect my capital but at the same time giving it the opportunity to bounce back during the day as with the stock above, if the weakeness doesn't hold?

 

[TabJockey]

What do you think about having a wider intra-day stop, which will be activated if things really start to get messy, but then have my regular end of day stop which I execute on the close?

This will obviously ensure I protect my capital but at the same time giving it the opportunity to bounce back during the day as with the stock above, if the weakeness doesn't hold?

I think thats a great idea

 

[tech/a]

I only activate a trailing stop when.

(1) The trade is in maturity. (this can be seen buy a rough wave count.)
AND
(2) Weakness is clear in price action.

Ill use single bars and pattern failures.
Much tighter and not a random average of some sort.

I really dont think about trailing a stop until at least 5-10:1 R is reached.
You'll never get big runs if you place a trailing stop straight up.

Bringing your Initial stop to even then 1 R is or should be a goal of every trade/r

 

[TabJockey]

I only activate a trailing stop when.

(1) The trade is in maturity. (this can be seen buy a rough wave count.)
AND
(2) Weakness is clear in price action.

Ill use single bars and pattern failures.
Much tighter and not a random average of some sort.

I really dont think about trailing a stop until at least 5-10:1 R is reached.
You'll never get big runs if you place a trailing stop straight up.

Bringing your Initial stop to even then 1 R is or should be a goal of every trade/r

Whats your average trade length?

 

[tech/a]

Varies quite a bit.
Days to a month tops.

But if a market is trending like it was back 200 to 2007
I traded Tech trader system for years---trades were average hold 380 days.
I haven't traded it since 2007.
Discretionary much shorter.
Index trades are often minutes to hrs and when I'm really confident a day or 2

 

[pavilion103]

Does anyone know of any good books which is either largely focused on trailing stops/exits or has some strong chapters on it?

Thanks

 

[tech/a]

Stops are an integrated methodology in line with conditions set for a trading system or method.
You won't find a use this or that practical guide to setting ANY stops.

The key and secret to setting stops in my opinion is the ability through testing to understand the consequences of setting ANY stop using ANY particular method ---be that a technical pivot/ M/A / ATR /Set% random dart or pure guess.

Know how setting which or what at various levels to define best use of YOUR stops

 

[TabJockey]

I guess what you have to focus on is the point in you're strategy when you are "wrong". You are aiming to take advantage of market inefficiency x, buying on signals y and z which indicate a previous high percentage chance of x occuring. The question is, when is it clear that y and z have not predicted x?

It also depends on your exit method, if you have some sort of MA cross exit you might find it gets you out before your stop most of the time. I think the best way is plan your exits, both when you are wrong and right and use stops as an emergency insurance against catastrophic losses. In a system I was working on today my average loss was2.24% with a 10% stop. Sometimes I am stopped out (catching falling knives) but most of the time event x fails to emerge and I exit at a small loss ready for the next yz combo.

 

[Boggo]

Know how setting which or what at various levels to define best use of YOUR stops

Along those lines, in the current market I am finding that every stock needs an individual approach that varies depending on individual stock behaviour.

The old approach of a dozen stocks all going the same way with a system trailing stop following behind just doesn't work at the moment (for me anyway).

 

[Mistagear]

Hi Folks,

I think Pav might be open to and looking for different methods, I've been using this quite effectively in a choppy market.
Once into a trade and looking to protect profits as opposed to protecting capital, I'm selling upthrusts and multiples of range swings, rather than wait for price decline back towards a stop. Once an extreme is sold, place a buy-stop beyond the exit to put you back in the trade should price continue.
In current climate, most moves are failing so as price starts to decline from the extreme, trail the buy-stop back down.
Use whatever methods you believe in, personally I trade VSA, to determine whether a re-entry remains wise.
This method has recently captured better returns than any trailing stop method I have come up with...
The rider is... works ok in chop but takes more effort, is slightly more labour intensive monitoring price expansion as well as contraction AND you still require a stop to protect capital.
I know, you're saying to yourself "this is not a trailing stop" and you are correct, so dont shoot me for suggesting something slightly different .. I'm happy using it anyhow

 

[tech/a]

Mistagear
Nice to see some excellent out of the square trading ideas and implementation.
You want to be careful you'll find yourself in that 3% of consistent winners.

I think trailing stops should be placed in a similar manner to your use of VSA which also is my weapon of choice in quick moving choppy markets.
The whole idea is to (in my opinion) place them ONLY when you've managed to score a quick un precedented wind fall so you can lock it in wit out giving it all back something like 25 % + in any day or 2 place your trailing stop really tight.
If taken out put IMMEDIATELY on your watch list and re enter if a continuation PATTERN (as opposed to single bar or so) shows up.

Bonjourno from Venice.

 

[pavilion103]

Mistagear
Nice to see some excellent out of the square trading ideas and implementation.
You want to be careful you'll find yourself in that 3% of consistent winners.

I think trailing stops should be placed in a similar manner to your use of VSA which also is my weapon of choice in quick moving choppy markets.
The whole idea is to (in my opinion) place them ONLY when you've managed to score a quick un precedented wind fall so you can lock it in wit out giving it all back something like 25 % + in any day or 2 place your trailing stop really tight.
If taken out put IMMEDIATELY on your watch list and re enter if a continuation PATTERN (as opposed to single bar or so) shows up.

Bonjourno from Venice.

What do you think of this? I was having too many 1R losses before so am trying to reduce the risk as soon as possible.
In the example below I move the stop to a the new point as quickly as possible (I'm not saying this is the best trade but want to discuss my trailing stop).

I've tried experimenting with stops in this way. I'm thinking that if a good trade is a good trade from the start, then if it goes back above that trailing stop it probably isn't worth being in.