Optimal trailing stop percentage

[torero]

	Quote:	al_sellatmarket
	Hi, guys It seems to be always a problem for a trader to choose the proper trailing stop percent, doesn't it? How do you decide?

Not sure what trading platform you're using to automate your trading, but in Tradestation, there is a minimum floor amount gained before the trailing percent kicks in. This is only way I do this with automation, bag in a required amount then leave the trailing percent wider than usual. That way, even if you get stopped out, you already have a certain gain bagged in already.

The thing about stops we set never coincides with the dynamics of the markets. The only way to adjust this is do analysis on the market measure the pivots or ranges, use that to adjust your trailing stops accordingly. Even then, it's no guarantee the stops will not get hit.

I've used stop loss at specific dollar amount and use trailing stop when it's already in the money. Of course, this is static but like all system traders recommend you have to optimize your systems from time to time to the changing market conditions.

[lrushing]

Hi Al,

The only way to preserve ones capital from devastation is to not risk the capital at all. There are lots of speculative reasons why your friends seem to intuitively buy stocks guided by some fundamental analysis.

The primary reason they buy is that they have a pre-conceived idea that the fundamentals provided by the company or outsiders is adequate enough information for the market place to see that the value of the stock is not sufficient and that it should be priced higher. However, because of supply and demand in the market place, usually when the price of a stock starts to decline, its a good indication of there being more supply available for sale than there is demand.

Probably one of the more conservative ways for your friends to preserve their capital is to use a diversified portfolio approach that minimizes the overall risk of total lose. Another approach might be to consider buying the S&P500 index spiders (SPY). This has shown great returns over a substantially long period of time for constant returns.

[walterw]

Irushing : would that be a buy and hold suggestion ?....

[lrushing]

Not necessarily,

Any and every trading style warrants the risk and money management of the trades. With that be said, for those individuals who may not scalp, day-trade, or aggressively swing trade, they still have to have all the same trading components (i.e., signals, entries, stops, targets).

A lot of traders who have not had enough exposure to the markets, will initially start with some of the components and after several painful lessons, realize the other ones are needed also.

[walterw]

My question was about buying SPY as you mention, would like to know now that you mention it, and considering you have a much greater knowledge on selecting a product to trade than we average traders...what edge SPY has to offer, thanks Irushing... cheers Walter.

[lrushing]

Ok, my misunderstanding.

The SPY is a ETF fund (referred to as a tracking stock by some). It is a great trading vehicle that mirrors the S&P500 and trades like a stock. This allows great diversification and if you look at the last 3+ years has increased from 80+ to now 140+.

There have been some nice pullback, but it has trended upwards nicely and is retesting the 1999 and 2000 highs (the internet boom)! So for a buy and hold strategy, that would have been a great return on your investment.

[walterw]

I see, will be interesting to see what happens on does highs... thanks Irushing for the information.... cheers Walter.