Jump to content

Welcome to the new Traders Laboratory! Please bear with us as we finish the migration over the next few days. If you find any issues, want to leave feedback, get in touch with us, or offer suggestions please post to the Support forum here.

  • Welcome Guests

    Welcome. You are currently viewing the forum as a guest which does not give you access to all the great features at Traders Laboratory such as interacting with members, access to all forums, downloading attachments, and eligibility to win free giveaways. Registration is fast, simple and absolutely free. Create a FREE Traders Laboratory account here.

morpheustrading

How To Trail Stops On Winning Swing Trades For Maximum Profit

Recommended Posts

Being a consistently profitable swing trader is a juggling act that requires one to constantly be focused on a variety of key elements of success: picking the right stocks, managing risk, determining when to sell, and even mastering the psychology of trading.

 

In this educational trading strategy article, we will dive into the topic of knowing how and when to sell winning ETF and stock swing trades for maximum profit, using the example of an actual swing trade we are currently positioned in. As for when to sell losing trades, there’s frankly not much to say other than always have a predetermined stop before entering every trade and simply honor it.

 

Since April 12, the model trading portfolio of our swing trading newsletter (The Wagner Daily) has been long Market Vectors Semiconductor ETF ($SMH). We initially alerted traders of the technical reasons we were bullish on the semiconductor sector (and $SMH) in this March 28 post on our trading blog. Since then, we have also reminded regular readers of our trading blog several more times about the increasing relative strength in semis.

 

In the “open positions” section of today’s (May 13) Wagner Daily, subscribing members will notice we have trailed our $SMH protective stop higher for the fourth consecutive day. Because the ETF is already nearing our original target area of $40, while remaining on a very steep angled climb, we have been continually squeezing the stop tighter in order to protect gains, while still allowing for maximum profit.

 

On the daily chart of $SMH below, we have labeled the increasingly higher stop prices we have used in each of the past four sessions:

 

130513SMH.png

 

As you can see, our stop in each of the past four trading sessions has been raised to just below the low of the prior day’s session. Whenever an ETF or stock is nearing your target area and you wish to maximize profits while still protecting gains, setting a stop just below the previous day’s low (allowing for a tiny bit of “wiggle room”) is a great strategy. This is because basic technical analysis states the prior day’s lows and highs act as very near-term support and resistance (respectively).

 

By using this method for trailing stops, you will be out of a winning position before the start of a significant pullback, while still allowing the gains to build as long as buying momentum remains. This system also provides an objective way for knowing when to close a winning swing trade, rather than guessing and potentially leaving significant profits on the table.

 

Of course, there are many different ways to manage exits on winning momentum trades, and some of those methods are equally as effective as what is explained above. The reality is that any trading system can be a great one if the trader proves to be profitable with it over the long-term (even if the system involves trading by the cycles of the moon).

 

As such, we would never imply that our system is absolutely the best way to manage stops on winning swing trades. But what we truly love about our exit strategy is its utter simplicity; simple trading strategies are the easiest to follow and thereby profit from. Why complicate a technique that has already been proven to work so well?

Share this post


Link to post
Share on other sites

Great effort indeed ! You can add more information in this and it will be more attractive that way. I have been in touch with many forums since i have set my mind to be a Trader. well there is surely a database that can help you a lot in staying in touch with the world globally, and it is Quandl - Find, Use and Share Numerical Data

The best thing is, it gives easy download in quick time.

Happy trading :)

Share this post


Link to post
Share on other sites

Thanks for the article. I like to leave my stop loose at first and as the trade starts to go parabolic tighten it more aggressively. For a long I start with a stop under the swing low, then when we move to new highs, pull back and make new highs again I will put it under the next swing low, then if we make new highs again I trail the prior days low. Vice versa for shorts.

Share this post


Link to post
Share on other sites
What about cases that the method does not work meaning that the pullback does not happen but the stop is taken out and the market reverses to make new highs?

 

Chuck LeBeau's "chandelier" stop is by far the best I have ever seen.....(apologies to the original poster).....google it and use it.....and for those who really want to do this right....there are other ways to make trade management decisions....the best professional system I ever saw was based on the work of Ken Shaleen....using open interest and volume to determine directional bias...

 

For the handful of folk really interested in moving forward, these are the resources I would start with...instead of the amateur hour crap that gets posted here...

Share this post


Link to post
Share on other sites
What about cases that the method does not work meaning that the pullback does not happen but the stop is taken out and the market reverses to make new highs?

 

you always need a way to re-enter. Some of the best traders i know go at the same idea a number of times- cut, cut, cut, cut - win.

Maybe not so applicable to day trading - system specific.

Share this post


Link to post
Share on other sites
Chuck LeBeau's "chandelier" stop is by far the best I have ever seen.....

 

I tested the crap out of this several years ago. Meh. It was okay. These so called "volatility" stops are all much of a much-ness really - standard deviation, average true range, it's all just throwing in a load more stuff to worry about . . .

 

In directional trading, any kind of hard stop introduces a non-linearity to the strategy.

 

Why not look at using options, hedged pairs for market-neutrality, intelligent position sizing, zero leverage to cope with the tail risk . . . Think outside the entry/exit/stop/target retail box?

 

Kind regards,

 

BlueHorseshoe

Share this post


Link to post
Share on other sites
I tested the crap out of this several years ago. Meh. It was okay. These so called "volatility" stops are all much of a much-ness really - standard deviation, average true range, it's all just throwing in a load more stuff to worry about . . .

 

In directional trading, any kind of hard stop introduces a non-linearity to the strategy.

 

Why not look at using options, hedged pairs for market-neutrality, intelligent position sizing, zero leverage to cope with the tail risk . . . Think outside the entry/exit/stop/target retail box?

 

Kind regards,

 

BlueHorseshoe

 

As has been pointed out by others before me, your claim to have tested (anything really) means nothing....my comment stands and any reasonably intelligent person will do their own testing in order to obtain current data and make an informed decision.

 

Ken Shaleen's work also stands on its own....to each his/her own....I use it to my benefit...and I notice many others whom I respect do the same....as with all things DO YOUR OWN TESTING...

Share this post


Link to post
Share on other sites
I tested the crap out of this several years ago. Meh. It was okay. These so called "volatility" stops are all much of a much-ness really - standard deviation, average true range, it's all just throwing in a load more stuff to worry about . . .

 

In directional trading, any kind of hard stop introduces a non-linearity to the strategy.

 

Why not look at using options, hedged pairs for market-neutrality, intelligent position sizing, zero leverage to cope with the tail risk . . . Think outside the entry/exit/stop/target retail box?

 

Kind regards,

 

BlueHorseshoe

 

Blue - while it is just throwing more stuff at it - at least it gets people thinking more about volatility based stops IMHO.....you correctly touch on this regards position sizing etc--- problem again is that often most folks dont have large enough accounts to worry about this.

...and it does depend on the system (thanks Zdo)

 

Problem with the use of options is in the testing....

 

Personally - trailing hard stops is fine no matter what you use - so long as you have a good method for re-entry because its exactly the problem Sergso mentioned. I also wonder if trying to go both long and short introduced far more problems in such a test/system.

 

A lot of this boils down the differences between systematized (backtesting possible) trading and discretionary trading (only forward testing really possible - then open to scrutiny)

Share this post


Link to post
Share on other sites

Hey Tim,

 

This sounds like a very solid strategy and is similar to what I do, depending on market conditions. I trail tighter than that in shaky markets.

 

Thanks for sharing your strategy.

 

Deron

 

Thanks for the article. I like to leave my stop loose at first and as the trade starts to go parabolic tighten it more aggressively. For a long I start with a stop under the swing low, then when we move to new highs, pull back and make new highs again I will put it under the next swing low, then if we make new highs again I trail the prior days low. Vice versa for shorts.

Share this post


Link to post
Share on other sites

This will obviously happen sometimes, and it doesn't bother me at all.

 

First of all, my goal is never to buy at the absolute bottom and sell at the absolute top. Rather, I focus on taking the "meat out of the middle" of the move.

 

Second, I am never afraid to re-enter a trade if it turns out I exited prematurely. In this case, I simply wait for the first short-term pullback to support.

 

What about cases that the method does not work meaning that the pullback does not happen but the stop is taken out and the market reverses to make new highs?

Share this post


Link to post
Share on other sites

Hey Steve,

 

Not familiar with either of these systems, but will definitely check it out. Thanks for sharing.

 

Deron

 

Chuck LeBeau's "chandelier" stop is by far the best I have ever seen.....(apologies to the original poster).....google it and use it.....and for those who really want to do this right....there are other ways to make trade management decisions....the best professional system I ever saw was based on the work of Ken Shaleen....using open interest and volume to determine directional bias...

 

For the handful of folk really interested in moving forward, these are the resources I would start with...instead of the amateur hour crap that gets posted here...

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.
Note: Your post will require moderator approval before it will be visible.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.


  • Similar Content

    • By millonmethod
      Hello everyone!
      I am an advanced trader, with many years of experience (about 15 years - 10 living exclusively from this)
      I am going to give you some tips that you must know:
      There are going to be many people who tell you that trade is easy, that with only crossiing a line  with another one you will win a lot of money.... and that´s not true.  No, Sir, reality is far away from that. Many people who start arrive here with the hope that someone "gives them" a free method, they watch youtube videos thinking that this will give them the "strategy" and in a few days they realize that it does not work for them - they lose money - and then They go looking for a new one ... and so on. YES, IT´S TRUE YOU EARN IN TRADING, A LOT. BUT THINK: for a few to win (10% + any BROKER) many others must lose (90% people). YOU MUST HAVE A MONEY MANAGMENT FORMULA ( you can email me) People study so many years to live on this, not because they are dumb, but to know what they do, when, and have absolute effectiveness. It´s very easy to get lost here: do not disperse, jumping from one to another strategy WILL NEVER give you money, it will only waste your time and make you nervous when trading. PEOPLE WHO CHANGE THEIR METHOD CONSTANTLY : LOOOOSE ALWAYS.   If you have the knowledge to develop it, take your time and do it.  Always try it first on DEMO for at least 2 weeks! If not: search to buy a solid strategy (no you tube videos pleassse ! Avoid losing money! ) This is like any business, it requires some capital to start (capital = money in the broker + solid made /purchased strategy) If you are lost: I RECOMMEND YOU NOT TO WASTE TIME IN YOUTUBE, JOIN PEOPLE WHO HAVE EXPERIENCE AND IF YOU ARE GOING TO BUY A METHOD ... PLEASE !!!! DO NOT BUY 10 BAD AND CHEAP METHODS, SAVE MONEY AND BUY ONLY 1 BUT EXCLUSIVE AND MUST ALLWAYS HAVE SUPPORT !!!!!  Do not buy Signals! They never keep up with constant profits! One week will win and the next will lose. Nothing that does not depend absolutely on you will give you the money you are looking for. And if you do not have a strategy (made or purchased) do not even try PLEASE PLEASE PLEASE: DO NOT USE REAL MONEY! AT LEAST 2 WEEK DEMO FREE HELP HERE!!!!!  IF YOU FOLLOW MY ADVICE YOU WILL BE PART OF THAT 10% WINNER, email me.
      Have a nice trading day
       
       
    • By adamal7
      Hello guys,
      I'm starting to swing trade commodities, especially soft commodities (corn, sugar, coffee, cotton, soybean, ...). I'm also checking gold and oil.
      My problem is I'd like to know what is the best broker for trading those markets (regulated, large commodity choice) ? For CFD trading.
      I'm thinking of IC MARKETS who are very good with forex and have good trading conditions.
      The concern I have is that I need a broker that offers MT4 as a platform, and also I'd like to be able to open mini lots positions for a better risk management.
      As a swing trader, I'm less concerned by the spread but looking at the financing fees.
      Wish you have a nice day, and thanks in advance.
      Alexandre.
    • By trading4life
      Hello, My name is trading4life.
      I just joined this forum.
  • Topics

  • Posts

    • Date : 21st October 2021. Market Update – October 21 – Stocks & USD slip on big Earnings Day. USD (USDIndex 93.55) cools a tad and again tests 2-week low (93.47) Yields stronger again, Equities closed up, but FUTS are down (Nikkei -2% on stronger YEN and Yuan). Big day for Earnings – TESLA beat but revenue numbers disappointed some. Oil up on drawdown. Evergrande – Bad News $1.7bn sale of 51% of HK unit to Hopson OFF, $1.7bn sale of HK HQ OFF, $83.5m coupon default triggers tomorrow. Good News $260m bond coupon, extended by 3 mths US Yields (10yr closed higher at 1.63) & – now 1.6533% Equities moved ground higher USA500 +16 (+0.74%) at 4536 (NASDAQ –0.05%) – Big movers – Verizon +2.41% & ABBT +3.3% (PayPal – 4.91%) – USA500.F back to 4500. Asian equities weaker. New VIX contract at +1.49% at 19.60 USOil up on drawdown n strong demand at $82.00 after EIA inventories showed -400K vs build of 2.1m Gold holds at 4-day highs – $1785 FX markets – a recovering USD – EURUSD 1.1646, Cable down from 1.3830+ to 1.3800, & USDJPY – off 4-year highs and pivots at 114.00. European Open The December 10-year Bund future is down -16 ticks, US futures are also in the red. DAX and FTSE 100 futures are both down -0.45 and US futures are also in the red, with the NASDAQ underperforming again, after already closing slightly lower yesterday. Indices remain at high levels, but tapering concerns, the global energy rout and supply chain concerns are capping the outlook for global growth. Markets will continue to watch earnings reports and central bank comments, especially in the UK where officials clearly are laying the ground for an early lift off. Meanwhile the announcement of Weidmann’s departure has raised hopes that the ECB will push even more to circumvent the no-bailout clause permanently – after the end of PEPP, which already helped BTPs to outperform yesterday. Today – US Initial Jobless Claims, Philadelphia Fed Business Index, Existing Home Sales, EZ Consumer Confidence, EU Council Meeting, Fed’s Daly, Waller, RBA’s Lowe, Earnings: AT&T, Intel, American Airlines, Southwest Airlines, ABB, (bottleneck problems) Vivendi, Hermes, (beat) Pernod Ricard,(beat) Barclays, (Revenue big beat) Unilever (Sales miss). Biggest FX Mover @ (06:30 GMT) AUDJPY (-0.50%) Rejection of 86.25 this morning as Yen lifts after a very weak October. Faster MAs aligned lower, MACD signal line dips and & histogram slips significantly lower, RSI 40.00 off OS level, H1 ATR 0.189, Daily ATR 0.817. Always trade with strict risk management. Your capital is the single most important aspect of your trading business. Please note that times displayed based on local time zone and are from time of writing this report. Click HERE to access the full HotForex Economic calendar. Want to learn to trade and analyse the markets? Join our webinars and get analysis and trading ideas combined with better understanding on how markets work. Click HERE to register for FREE! Click HERE to READ more Market news. Stuart Cowell Head Market Analyst HotForex Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in FX and CFDs products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.
    • Meet a maverick on Blockster   Blockster is a cryptocurrency social platform.   Blockster connects everyone within the blockchain industry into one place—all the cryptocurrencies, the teams behind the projects, as well as, the traders and investors. Communicate and network with the very core of the blockchain industry, and stay ahead of the market trends via Blockster.   Get insightful posts, reviews, breaking news, interesting comments, and latest updates from the world of cryptos, from Azeez Mustapha: https://blockster.com/AzeezMustapha46102 
    • Nice article send in here, do sharing other such articles and also share your experience of Forex Trading.
    • Never tried Forex Trading with software,  I am still learning. But someday, I would like to give it a shot. 
    • Date : 20th October 2021. Market Update – October 20 – USD bounces from 2-week low, Stocks & Yields higher. USD (USDIndex 93.70) recovers from test of 2-week low (93.47) Yields stronger, Equities closed strongly on good Earnings, Netflix beat big time (Subs 4.38m vs 3.86m. – globally now 213.6m) Squid Game watched in 142 million households in 94 countries. Biden expects a deal on infra budget, Chinese housing prices slow, and NK fired more missiles (non-ballistic today) into S. China Sea. US Yields (10yr closed higher at 1.6350) & touched 1.662 earlier – now 1.6495% Equities moved higher gaining momentum USA500 +33 (+0.74%) at 4519 (NASDAQ +0.71%) – Big movers – J&J +2.34% & APPL 1.18% – USA500.F higher into 4503. Asian equities higher (Nikkei +0.76%) VIX closed down again at 15.57 (a new 8-week low – VXN – (which measures Nasdaq volatility) – at lowest since February 2020) USOil down from 7-yr high, at $83.00 after private inventories – trades at $81.00 Gold holds at $1775 now from yesterday’s high of $1785 and low of $1767. FX markets – a recovering USD has – EURUSD 1.1640, Cable down from 1.3800+ after CPI data at 1.3785 & a weaker YEN, USDJPY – 4-year highs – 114.70. Overnight – UK CPI a tick weaker than expected (3.1% vs 3.2%) PPI in line. German PPI much stronger than expected @ 2.3% vs 1.1%. European Open – The December 10-year bund future is down 35 ticks, underperforming versus Treasury futures. Yields moved broadly higher across Europe yesterday and while ECB officials are doing their best to keep rate hike speculation at bay, they are fighting an uphill battle, especially as the BoE is preparing for an early lift off on rates. The surprise misses for UK CPI could dull the expectation. Today – EZ Final CPI, Canadian CPI, ECB’s Elderson, Fed’s Bullard, Earnings – Verizon, Tesla, IBM, Abbot, AMSL, Nestle (already out – a big beat especially for Pet food Division) Biggest FX Mover @ (06:30 GMT) NZDCHF (+0.40%) 5th consecutive day higher today (from 0.6425) breached 0.6600 earlier, and testing 0.6630 now. Faster MAs aligned higher, MACD signal line & histogram trending higher, RSI 65.00 OB but still moving higher, H1 ATR 0.0008, Daily ATR 0.0054. Always trade with strict risk management. Your capital is the single most important aspect of your trading business. Please note that times displayed based on local time zone and are from time of writing this report. Click HERE to access the full HotForex Economic calendar. Want to learn to trade and analyse the markets? Join our webinars and get analysis and trading ideas combined with better understanding on how markets work. Click HERE to register for FREE! Click HERE to READ more Market news. Stuart Cowell Head Market Analyst HotForex Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in FX and CFDs products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.
×
×
  • Create New...

Important Information

By using this site, you agree to our Terms of Use.