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how to use trailing stops without tears

  • #1
  • First Post: Aug 26, 2009 7:05am Aug 26, 2009 7:05am
i am a newbie to the forex world. i have heard and read a lot about cutting your losses and allowing your profit to run.
i have tried this but each time i am worse off. most often i enter a trade with a 30pips profit target, really many times market would get to where i had wanted to exit but i always remember "let your profit run" and decides to trail the market with over 75% times i get stopped out lower than my initial target.
maybe there something i am not doing rightly or is letting your profit run a myth?

please i need experienced traders to help me out.
  • #2
  • Aug 26, 2009 9:07am Aug 26, 2009 9:07am
Quoting austineejo
i am a newbie to the forex world. i have heard and read a lot about cutting your losses and allowing your profit to run.
i have tried this but each time i am worse off. most often i enter a trade with a 30pips profit target...

Hi austineejo

Trailing stops are a substitute for poor analysis or lack of confidence most of the time!

Depending on your strategy you might be better off taking partial profit at your first target and moving your stop to breakeven on the remainder if it's appropriate. The side-effect of this is that it can skew your risk:reward if the rest of the trade is stopped out at b/even, ie you'll only have profit on a portion of the trade, but an initial stop on the full position on other trades.

Letting profits run is a great mantra and it's definitely not a myth but it's difficult to do, maybe try it gradually and gain confidence in your own ability, so instead of taking 30 pips let the trade run to say 40, you can always take the 30 if price reverses or retraces so you're not any worse off. Next time let it run a bit further...and so on. What's the worst that can happen, you take your original 30 pips.

If you're trading technical analysis then your strategy should really be able to tell you a probable target, ideally before you enter the trade so you can work out in advance if the potential reward is worth the risk.

Fear of losing money (or giving back profit) is one of the hardest things to overcome in trading and something every trader experiences, time and confidence in your ability/strategy usually sorts the problem out.

How are you getting on with the more important 'cutting losses short', have you mastered that one?
  • #3
  • Aug 26, 2009 9:15am Aug 26, 2009 9:15am
many thanks Pipmutt
what i have been doing is to go for a risk reward ratio of 1.5:1 i.e risking 20pips for 30pips. quite frankly the temptation to shift the stop loss is there sometimes i am struggling with the emotional part of it.
sometimes trading seems mechanical when ever i try applying discretion it turns out against me
  • #4
  • Aug 26, 2009 9:25am Aug 26, 2009 9:25am
Quoting austineejo
many thanks Pipmutt
what i have been doing is to go for a risk reward ratio of 1.5:1 i.e risking 20pips for 30pips. quite frankly the temptation to shift the stop loss is there sometimes i am struggling with the emotional part of it.
sometimes trading seems mechanical when ever i try applying discretion it turns out against me
1:1.5 but I know what you mean

If you've got a mechanical system that's proved effective and profitable then excellent, let it do all the work, all you have to do is trade it!

You've got a decent risk:reward (as long as win:lose is right), if you're finding you're cutting winning trades short too often then like I say let them run a bit and make money for you, why stop a winning trade when it's making money? Lock in some profit or reduce exposure (risk) and let it do it's thing.

You're fortunate, most new traders cut winners short and let losses run, at least you're half the way there!

Be careful of moving your stop too quickly, you've still got to allow the trade room to breath.
  • #5
  • Aug 26, 2009 9:35am Aug 26, 2009 9:35am
Quoting pipmutt
1:1.5 but I know what you mean

If you've got a mechanical system that's proved effective and profitable then excellent, let it do all the work, all you have to do is trade it!

You've got a decent risk:reward (as long as win:lose is right), if you're finding you're cutting winning trades short too often then like I say let them run a bit and make money for you, why stop a winning trade when it's making money? Lock in some profit or reduce exposure (risk) and let it do it's thing.

You're fortunate, most new traders cut winners short and let...
Pipmutt, if i may ask how is one suppose to handle news.
sometimes i see a good news i.e actual better than forecast and yet market moves the otherway.
honestly it has happened to me severally that i am comtemplating not trading during market news releases. but my problem is how long should i stay out of the market after a news release.
  • #6
  • Aug 26, 2009 10:05am Aug 26, 2009 10:05am
Quoting austineejo
Pipmutt, if i may ask how is one suppose to handle news.
sometimes i see a good news i.e actual better than forecast and yet market moves the otherway.
honestly it has happened to me severally that i am comtemplating not trading during market news releases. but my problem is how long should i stay out of the market after a news release.
A lot depends on what the release is, how it compares to the expected data, and how much the market has already priced in.

Trading on news can be extremely lucrative but you need to have a reasonable handle not so much on economics and fundamentals but more on how the market is thinking, again it's not easy and something which you would probably be better off avoiding at this stage. It doesn't stop you watching it though, Bloomberg and Reuters have some excellent commentary pre and post releases which can offer a great insight into how the market thinks and why it reacts sometimes unpredictably the way it does.

A mechanical system like yours shouldn't really be affected too much by the odd unimportant release unless a price spike affects your indicators and maybe produces false signals. If there's a particularly significant and potentially volatile release like NFP, interest rate announcement, or central bank press conference then it's probably wise to stand aside until the market settles down a bit after the initial reaction, you should be able to see from price action when things are back to 'normal'. Time wise that could be anything really, from a few minutes to a few hours.

There's no need to be worried about news releases, just as long as you're aware of release times and their potential to wreak havoc on your trade and stops then you're safe enough. There's always a risk of price gaps across particularly volatile data (ie NFP) so it might be wise to be flat at those times but apart from that it's just business as usual!

How long have you been trading roughly, and who do you trade with if you don't mind me asking?
  • #7
  • Aug 26, 2009 10:14am Aug 26, 2009 10:14am
Quoting pipmutt
A lot depends on what the release is, how it compares to the expected data, and how much the market has already priced in.

Trading on news can be extremely lucrative but you need to have a reasonable handle not so much on economics and fundamentals but more on how the market is thinking, again it's not easy and something which you would probably be better off avoiding at this stage. It doesn't stop you watching it though, Bloomberg and Reuters have some excellent commentary pre and post releases which can offer a great insight into how the market...
i have been on for about a month, i am trading with fxcm
  • #8
  • Aug 26, 2009 10:30am Aug 26, 2009 10:30am
Quoting austineejo
i have been on for about a month, i am trading with fxcm
Just a month, you're doing well and asking some of the right questions, good job! Take it slowly and don't try to rush things, get 110% confident and competent in what you're doing first before moving to the next stage and I think you'll do great. Not that you would probably but never be reluctant to ask questions no matter how stupid you think they may sound, we've all been there believe me! And never get complacent or take your eye off the ball, the market has a habit of surprising when you least expect it!

That's my good deed for the day, I hope it's been helpful
  • #9
  • Aug 26, 2009 10:39am Aug 26, 2009 10:39am
Quoting pipmutt
Just a month, you're doing well and asking some of the right questions, good job! Take it slowly and don't try to rush things, get 110% confident and competent in what you're doing first before moving to the next stage and I think you'll do great. Not that you would probably but never be reluctant to ask questions no matter how stupid you think they may sound, we've all been there believe me! And never get complacent or take your eye off the ball, the market has a habit of surprising when you least expect it!

That's my good deed for the day, I...
many thanks Pipmutt you made my day
  • #10
  • Aug 26, 2009 11:00am Aug 26, 2009 11:00am
Yeah, what pipmut said! In addition, if something is not working as planned ... scrap it. If you find yourself loosing or your expectations are not matched using trailing stops ... then scrap it and move on to something that works. Never let a losing strategy become habit.
  • #11
  • Last Post: Aug 26, 2009 12:24pm Aug 26, 2009 12:24pm
My advice is this, take a look at the various systems around the forums, if you feel that your personal technique tends to put you in trades that go against you, check for other systems that have a more reliable track record. Don't jump into the first profitable system you see, because it may be to complex for you to understand the exact particulars of the system.

R:R only helps when your P:L allows for it.

For example, if you profit 20 pips on 5 trades while risking 10 pips each trade, then have 20 loosing trades in a row, each loosing 10 pips, is this a system that is profitable long term? Most likely not. even tho the R:R is 1:2, the P:L is 100:200 which makes this system a account buster.
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