Trailing stoplosses

[sam21poddy]

When do I raise the stoploss level? For example, I bought ANZ today at 23.02 and my stoploss is 2% (so $22.56). Do I leave the stoploss at that level all day today or do I raise it as the price rises. Eg. the price is now 23.12, so do I adjust the stoploss now or leave it at 22.56 all day? I'm not really sure when trailing stoplosses are supposed to be adjusted.

 

[kaveman]

Stop losses and trailing stops never go down. They move like a rising stairway. Sideways until a higher value, then t the new higher value and thens ideways until a new higher value

 

[sam21poddy]

kaveman

Thanks for replying. So does that mean that, now that I have raised my stoploss to 22.66 as the price rises, that if the price falls to 22.66, I then sell, even though at the beginning of the day I said to myself that I would sell only if it fell to 22.56? Are trailing stoplosses and stoplosses two different things? And do you have to decide which one you are going to follow?

 

[tech/a]

First trailing stop should be at breakeven.

IE when your trade trades the distance of your risk in the direction(long) that you are looking for place your stop then at the breakeven point of your trade.

IE if brokerage costs are $50 in and out then place the stop at Buy price +$100 but only when your trade has gained the 2% that your rsiking otherwise leave all stops where they are.

Be careful not to strangle the trade with a trailing stop that doesnt allow some intraday noise.

Trailing stops AFTER this are placed at HIGHER LOWS as they are created in the trend.(One suggestion).

I can post an example chart tonight.

 

[dutchie]

Tech do I understand that:

Say you buy 1000 shares at $25.00 each. Then if maximum loss is 2% and

brokerage is $50 in and $50 out ==> Total= $100.00 (expensive!)

Start STOP LOSS 1. is $25.00 - (2% of $25.00)= $25.00 - $0.50= $24.50

If price of share rises 2% i.e. $25.00 + $0.50 = $25.50

Then raise STOP LOSS to initial price plus brokerage per share (i.e. $100/1000=$0.10)

STOP LOSS 2. = $25.00 + $0.10 = $25.10 (Break even level)

 

[tech/a]

1000 x $25 = $25000
2% stop = $500.
Stock would have to rise to $25.50 to cover.

Personally I would raise the stop to this level
if IN THIS CASE the stock rose to $26 so that the trailing stop at $25.50
had some room.

This means that breakeven in pure terms would be $25.60.
Your numbers would then be not effected.

By that I mean the risk reward ratio would be un effected as the trade would not be logged as a loser.
Hope that makes sence.

 

[dutchie]

Tech
I see what you are getting at but your second post is different to your first.
1st post need a gain of 2%
2nd post need a gain of 4%
What is your answer to initial question? (not trying to be rude or smart)

 

[kaveman]

Here is an example of a stop loss (pink) and trail stop (red)
essentially stop loss neve moves, trail stop rises with the trade

 

[tech/a]

Graham----nice what is it?

 

[kaveman]

Tech it is called a price chart

It is my part of my current trading system, the basis of which I have posted the code for on rc.

 

[sam21poddy]

OK, so I have worked out the breakeven point for tomorrow however my gut feeling tells me it is too tight and could easily be taken out in the open or during the day during normal price ranges. So on the one hand, I am trying to be strict with myself but on the other hand, my gut feeling is telling me it is the wrong thing to do and I should set the stop a little lower. I can see that I am not going to be very good at sticking to stoplosses.

 

[kaveman]

The idea of stop loss and trail stops is to balance the requirements to exit before you lose too much and to not be stopped out too soon by normal price movement. You will never have a perfect method, but you can hope to strike a reasonable balance.
There is no point having a tight stop if you get stopped out too early, but you also do not want something too loose that just gives back too much money.
for example if the normal movement of a stock is 2% you would need to have your stop outside this 2% range.

 

[tech/a]

Tech it is called a price chart

It is my part of my current trading system, the basis of which I have posted the code for on rc.

Rolf.

 

[tech/a]

An example of chasing up the retracement lows

 

[RichKid]

Rolf.

Tech, you're funny even when you're 'rolling on the laughing floor'....
I like the caveman humour too- Very droll Humphrey!

As for trailing stop ideas you could use bollinger bands if you're riding a trend, lots of ways. Trend lines are the easiest imo, sell on second day that prices close below it etc...make up your own rules. Tech's chart shows it all nicely and it's essential to get into a habit with stops, can't just use them when you feel like it, set some rules.

 

[wayneL]

'rolling on the laughing floor'....

hehehehe