DislikedHere are my thoughts on this. If Jacko answers differently, then go with his answer.
Trail the 50 pip stop beginning immediately after the trade is opened. Keep the stop at, or as close to 50 pips at all times as you can. The reason for doing so is to maximize both risk reduction, and retention of profits.
In a losing trade, every pip over 50 is equity lost unnecessarily.
In a winning trade, every pip over 50 is profit lost unnecessarily.
Let's say you have an account with FX Solutions, where they will automatically trail a stop every 10 pips. For a trade opened at 1.3600 with a stop of 1.3550, this would be the sequence for a losing and winning trade:
LOSING TRADE
Price = 1.3600, Stop = 1.3550
Price = 1.3610, Stop = 1.3560
Price = 1.3620, Stop = 1.3570
Price = 1.3630, Stop = 1.3580
Price = 1.3639, Stop = 1.3580
Price = 1.3610, Stop = 1.3580
Price = 1.3570, Stopped out at 1.3580 for a loss of 20 pips
If the stop had been trailed perfectly, pip by pip, the trade above would have been stopped out at 1.3589 for a loss of 11 pips instead of 20.
WINNING TRADE
Price = 1.3600, Stop = 1.3550
Price = 1.3610, Stop = 1.3560
Price = 1.3620, Stop = 1.3570
Price = 1.3630, Stop = 1.3580
Price = 1.3650, Stop = 1.3600
Price = 1.3660, Stop = 1.3610
Price = 1.3669, Stop = 1.3610
Price = 1.3630, Stop = 1.3610
Price = 1.3600, Stopped out at 1.3610 for a 10 pip gain.
If the stop had been trailed perfectly, pip by pip, the trade above would have been stopped out at 1.3619 for a gain of 19 pips instead of 10.
50 pips is plenty of room for the trade to breathe. Over a long series of trades, the average stop-out may be 23 pips if the trailing stop is kept as close as possible to 50. If trailed more loosely, then the average stop-out will be larger at, say, 28 pips. This is an average of 5 additional pips per losing trade. That's 500 pips over the course of 100 trades. Jacko is trading $1500 per pip. Do you think he wants to lose an extra $750,000 every 100 trades?!
Again, over the course of a long series of trades, the average win might be 127 pips if the trailing stop is kept as close as possible to 50. If trailed more loosely, then the average win would be smaller at, say 117 pips. This is an average of 10 fewer pips per winning trade. That's 1000 pips over the course of 100 trades. At $1500 per pip that is an extra $1,500,000 in profits given back to the market.
I believe I read that Jacko has an 80% win rate. That means that, on average, every 100 trades would have additional losses of:
$750,000 * 20% = $150,000
and, on average, every 100 trades would give up profits of:
$1,500,000 * 80% = $1,200,000
So we have $150,000 in extra losses, plus $1,200,000 in gains given up for a total of $1,350,000 over 100 trades on average.
For that kind of money, I can understand why Jacko has someone constantly updating his trailing stop. I would too!!
But, most of us have much smaller accounts than Jacko. Does that mean we can be more lax with maintaining the stop as close as possible to 50 pips? I think not!!! The math works the same regardless of pip value. If we are lax, and don't update the stop often, then it will take much, much longer to grow our accounts to the level where we too can trade at $1500 a pip!
Dial
P.S. I let FX Solutions trail my stop automatically every 10 pips, so I get at least SOME trailing action when I'm away from my computer. But, in addition, I also update the trailing stop manually every chance I get. FX Solutions makes this easy with buttons to increment and decrement the stop one pip at a time. Once I'm done updating the stop manually, FX Solutions starts counting 10 pips again from the new stop, not from the initial stop. Very handy!!Ignored
Hi Dialist and Simjones!
Maybe I could help with a Trailing Stop EA, I normally don't use EA's, but at the most Metatrader Platforms which I know you can not trail from the beginning, it is only possible to trail in Profit, you know what I mean. With this EA you can trail immediately when opened the position, you can also decide the size of the Trailing Step and you can also decide if you want only Profit Trail or not. I use it since around 3 week's on 2 Demo's and one Real Account and it works very good.
Why I write it to Simjones is, because I don't know if I can post the EA, because it is from an other forum, I could also post the Link to the EA. But I do nothing until Simjones gives me the ok, or not.
Erkro
).
