Optimal trailing stop percentage

[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?

[TinGull]

Hi al, welcome to the forums! A good way to look at a trailing stop is the ATR (average true range) of the last 10 bars. This will give you a good idea of the current market volatility for whatever market you're currently trading, and you can adjust your stop accordingly.

[al_sellatmarket]

	Quote:	TinGull
	Hi al, welcome to the forums! A good way to look at a trailing stop is the ATR (average true range) of the last 10 bars. This will give you a good idea of the current market volatility for whatever market you're currently trading, and you can adjust your stop accordingly.

So, the idea is to tie stops to stock volatility, right? I personally believe this is very logical approach.

Well, but the volatility of a stock changes with time and here comes the necessity to track the stop and adjust it accordingly. This is rather time costing occupation.

How do those, who are not involved in all kinds of programming handle this problem? Any ideas?

[Soultrader]

You can use stops based on technical analysis. If price moves in your favor and breaks a resistance level, move your stop below it, etc... Identify S&R levels, fib retracements, trendlines, channels, etc... and move your stop accordingly. I personally use target points and do not trail. Or I will move stops as price breaches a pivot.

[TinGull]

How often are you making trades? Are you primarily intra-day trading? Or are you swing trading over days/weeks?

[walterw]

al : first welcome to TL ¡¡ you will have a diversity of ideas and diferent aproaches on this topic, any off them are finally valid, it depends on how your trading style is to choose wich one makes you feel more confortable, let me add my concept to this : PRICE ACTION and this price action is pivots to pivots (higher highs, higher lows, lower lows, lower highs etc..) when you are "trailing" the market, you are following the markets action, nothing better (from my stand point of view) than price action.... each of this pivots are key places to add or reduce your positions.... whatever your trading aproach maybe... thats a basic concept here, if interested we can get deep into it, now RRR its where I find the true edge to this trailing aproach, especially because I get the chance of having very tight stops vs large gains... cheers Walter.

[al_sellatmarket]

	Quote:	TinGull
	How often are you making trades? Are you primarily intra-day trading? Or are you swing trading over days/weeks?

Not intraday - such a trading style requires LOTS of time and, frankly speaking, I'm not a professional fulltime trader. I would call it amatorish mid-term investing. My positions remains open 30-40 days in average.

Since I diversify my capital and keep about 15-20 stocks wide portfolio, I'm condemned to make rare trades...

[al_sellatmarket]

	Quote:	Soultrader
	You can use stops based on technical analysis. If price moves in your favor and breaks a resistance level, move your stop below it, etc... Identify S&R levels, fib retracements, trendlines, channels, etc... and move your stop accordingly. I personally use target points and do not trail. Or I will move stops as price breaches a pivot.

Well, for me personally using different kinds of indicators is not a problem since my primary profession is software design and I'm able to automate almost every thought I have about trading strategies.

But I have friends, who buy stocks guided by some fundamental analysis (news, quarterly reports, gossip, hype) and then sit infront of their portfolio every day watching market ups and downs and having no clear exit strategy to follow.

They have no programming skills and even don't bother if technical analysis exists. So, a couple of weeks ago the guys lost lots of money while the markets sell-off. DELL, MSFT (one of the favorite stocks traded by computer geeks) drew down sugnificantly and caused losses.

So, my question was about a comprehensive solution for such kind of "traders" to preserve their capital from devastation. They open positions almost intuitively, but when it comes to selling, emotions come into play and they sit and wait for their stocks to go up again, but the stocks do not go in the right direction ... common picture.

[walterw]

In that case al, we are not talking of closing "trailing" positions only, but when and why to open a position... that gets to a more complex topic, Why should I actually buy a stock... ? if they bought because of fundamental reasons, mostly you get trapped on lies... Technical analisis is the best way to take positions without being fooled... cheers Walter.

[Kiwi]

My stop percentage is a little under 0.05%

I am of course a day trader.