Replies to post #37624 on lowtrade

[lowtrade]

Here's a book which after reading I moved the answer from the bottom to the TOP. LOL Read the rest if you care to be bored and possibly confused.

Rap it up, Trailing stops will give you more, while maintaining your down side risk. Choosing your down side risk could be support to entry divergence. Average price swing prior to entry, or a TA indicator. Like the SAR overlay or ATR if it works for you.

All that is going to be hard to cover without knowing what price range, whether day, or swing trading. An example symbol would have helped.

But here we go 1 subject at a time. I'll start with, The answer to all your problems is learn to be happy with want you get. Then there is no NEED for more.

Then trailing stops, which seems to actually be the answer to your problem.

Trailing stops don't show up in the market until the required conditions you choose are met. So no M&M is going to close you out before goal. You saying M&Ms, that makes me think your trading the OTC and not all brokers will allow conditional orders, but lets say yours does.

All a trailing stop really is a stop order which tracks any increase and sits at your choosen divergence from the highest point reached. It will continue to go up if price does, but will not go down if price does.

You can choose the divergence in dollar or cents (cash numbers) or loss precentage. Using % will adjust with price change. I like that over a price number. Because it automatically adjusts the stop a little looser as the run continues. Once in the green I don't mind opening up a little to prevent stopping out sooner in a run.

Say I want a gain target of 10%, so I'll accept a loss of 5%, keeping my win/loss ratio at 2 to 1. (thats how I trade brackets, my loss is always half my gain, don't care about support or daily price swings) Say I buy at $1.00 and place a trailing stop in at 5%. The price rises to $1.10 up 10%, my trailing stop moves from .95 to 1.045. From 5% of $1.00 to 5% of $1.10. Noticed I loosened my stop loss from 5 cents to 4.5 cents automatically.

As long as the $1.045 price isn't reached your trade continues. It come down to 1.08 and 1.05, (where you would stop out with a 5 cents stop) then runs to 1.20. Since the price never reached the 1.045 stop price. The new trailing stop will be 1.14, or 5% of 1.20 the new high.

This will continue to be stored in your brokers computer, hidden from the open maket until the price falls to the latest stop price. Say the price doesn't get higher then $1.20, but falls to $1.14. The requirement for closing your order is met and your position is sold at the market.

A trailing stop will capture increase in price. As originally you would have been satisfied with a 5% acceptable loss at .95, but you end with a sell at $1.14. 5% below the highest price reached.

Next, the term fast running stocks get sold prematurely. That's an oxymoron. If you want to sell at a choosen acceptable price. Speed of price change has nothing to do with when, only where your order is sold. I don't get premature of sacrificed potencial gain at all. I guess you mean you can't jump in and change your mind. The trailing stop can settle that need for more, but it's going to close on price, not speed of change.

Next is probably you main problem. Picking where to sell high or low. You mention the ATR technical indicator. But I have no idea how you can use that to determine any price. The ART average true range is used to gauge volatility or interest / disinterest in the move. Not the price level. It's more for support then entry/exit. A brother to the CMF, without the nice graph lines for judgement help, showing sentiment. But if it works for you continue to use it till is stops doing so.

Picking exit high and low without a chart pattern to project the high target is the universal unanswerable question. "When is enough enough" Seems never from your post. Choosing top resistance and bottom support is logical and completely reasonable. As falling a little short at both ends with your actual orders as protection so the trade will close. Again the trailing stop will give you more without taking less.

But that leave where to place the trailing stop. Should you subtract the support level from the entry? Sometimes that's just way to large, sometimes to small.

What I would do if trading like this would be, gage the daily price swings from twice the previous time span, equal to how long you feel the move should last and use the average. Example: one resistance broke and you visually see it should take a 2 weeks to get to next resistance. Look at the high/low candles (Including wic's) from the 4 weeks before and pick the average of that value as your stop. That way unless there is that unusual price swing day, you should be fairly safe.