Effective Trailing Stop Method? | Forex Factory

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Effective Trailing Stop Method?

  • #1
  • First Post: Mar 13, 2017 9:34am Mar 13, 2017 9:34am
Hello Members,

Can you suggest any good trailing stop methods which is proven effective in long run?
The traditional one cuts trades with whipsaws as its not price action based.

What is your experience with trailing stops?

Thank you in advance,
Regards
PP
Discussion is an exchange of knowledge;argument is an exchange of ignorance
  • #2
  • Mar 13, 2017 10:06am Mar 13, 2017 10:06am
I basically use manual trailing stops following higher lows/lower highs and support/resistance areas as possible partial targets as described in article bellow. I'm a swing trader so it works very well for my trading style. I lose more often then win, but when I win my average profit is 2.65x greater then my average loss (win ratio = 42 % / profit factor = 2.65). If you are a range trader or scalper this technic may not work for you. It's all about your win/lose ratio and profit factor.

http://www.tradeciety.com/four-steps...de-management/
  • #3
  • Mar 13, 2017 10:55am Mar 13, 2017 10:55am
Quoting Tom81
I basically use manual trailing stops following higher lows/lower highs and support/resistance areas as possible partial targets as described in article bellow. I'm a swing trader so it works very well for my trading style. I lose more often then win, but when I win my average profit is 2.65x greater then my average loss (win ratio = 42 % / profit factor = 2.65). If you are a range trader or scalper this technic may not work for you. It's all about your win/lose ratio and profit factor. http://www.tradeciety.com/four-steps...de-management/...
Thank you Tom for sharing the article and your method.
I am a scalper tends to swing day trades. My goal is making 20-30 pips for each winning trades, rather if it moves more than that, then I will continue holding it. I am planning to use VPS for this, as for 20-30 pips it generally takes more 1-2 hours on average if its EURUSD then 4 hours may be... So staring at the chart for 2 hours is a hectic job, that's why planning to code custom trailing stops, so that I can take some break between trades.

Sometimes my trade moves 80 pips under 8 hours with GBPJPY. So you can guess 8 hours is lots of time.

Regards
Discussion is an exchange of knowledge;argument is an exchange of ignorance
  • #4
  • Mar 13, 2017 11:20am Mar 13, 2017 11:20am
I'm not a coder, but maybe you could use Asymmetric Fractals indicator to identify higher lows/lower highs (I find 5 FramesBefore/candlesticks 9 FramesAfter setting to work best) and automate your trailing stop according to it. You can use it on 1m or 5 m chart to recognize very short term waves. I trade from 1h/4h/daily chart, so my trades tend to take a day or longer to complete. The other method to establish your trade targets can be simple technical patterns targets combined with support/resistance levels. The best books I have read on this subject were wrtitten by Thomas Bulkowski.

https://www.dailyfx.com/forex/educat...ling-Stop.html
Attached File(s)
File Type: ex4 AsymmetricFractals.ex4   9 KB | 684 downloads
File Type: mq4 AsymmetricFractals.mq4   2 KB | 945 downloads
  • #5
  • Mar 14, 2017 3:33am Mar 14, 2017 3:33am
Quoting Tom81
I'm not a coder, but maybe you could use Asymmetric Fractals indicator to identify higher lows/lower highs (I find 5 FramesBefore/candlesticks 9 FramesAfter setting to work best) and automate your trailing stop according to it. You can use it on 1m or 5 m chart to recognize very short term waves. I trade from 1h/4h/daily chart, so my trades tend to take a day or longer to complete. The other method to establish your trade targets can be simple technical patterns targets combined with support/resistance levels. The best books I have read on this...
Thank you for the indicator, actually I have seen this article before on Asymmetric Fractals, Currently checking its code. It works with Higher High Higher Low figures. Now let see I can code it in trail stop EA or not.. I will share code here.

I have Thomas Bulkowski Encyclopedia of Chart Patterns in my library, will look into it.
Thank you again.
Discussion is an exchange of knowledge;argument is an exchange of ignorance
  • #6
  • Mar 14, 2017 10:25am Mar 14, 2017 10:25am
I actually use trailing stop trading tool in my live account when I get enough number of pips in a single trade! In the beginning stage of a trade position I don’t like to use this popular technical tool! On the other hand, during major news events like NFP I use trailing stop if I get huge money in a quick time! Thus I use trailing stop in my trading; besides I always use stop loss trading tool!
  • #7
  • Mar 14, 2017 1:38pm Mar 14, 2017 1:38pm
Every time I reverse engineer a trailing stop (volatility or set pip... ie: ATR or 'xx' pips) I fell like I'm going down the rabbit hole.

It makes sense to place your stop behind a level of opposing limit orders. That way those orders can help to halt price & turning it back if it retraces on you. They can be recent swing h/l (proof there were limit orders/opposing force to drive price away) or news of a bank/large entity or group of retailers placing limit orders at a level.

The most interesting discovering I had when researching stops & stop-placement is what price does when you map out other trader's trailing stops. Like mark a $10 trailing stop on Gold price chart or 100 pip trailing stop on an FX chart & see how price reacts at those levels.
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  • #8
  • Mar 14, 2017 2:34pm Mar 14, 2017 2:34pm
Quoting PipPirates
{quote} ... Now let see I can code it in trail stop EA or not.. I will share code here...
Thanks, I would be very grateful
  • #9
  • Mar 15, 2017 1:01am Mar 15, 2017 1:01am
One of the most commonly used methods for limiting the amount of loss from a declining stock is to place a stop-loss order with your broker.
  • #10
  • Mar 16, 2017 2:36am Mar 16, 2017 2:36am
Quoting Ryan420
Every time I reverse engineer a trailing stop (volatility or set pip... ie: ATR or 'xx' pips) I fell like I'm going down the rabbit hole. It makes sense to place your stop behind a level of opposing limit orders. That way those orders can help to halt price & turning it back if it retraces on you. They can be recent swing h/l (proof there were limit orders/opposing force to drive price away) or news of a bank/large entity or group of retailers placing limit orders at a level. The most interesting discovering I had when researching stops & stop-placement...
This is interesting
Well coding advance level wave structured based trail stop is difficult. Trailing stops with every new higher high bar is easy job although.
I thought a lot & came to theory, that I can use stop loss level with two core parts.

One part is automatic with traditional one. If Stop loss is 10 pips then trailing stop should be 10 pips too, then it will get balanced properly.
Now 2nd part is manual with trader judgement. For example trade moves to 20 pips trail stop at +10 pips. I saw some double top or bottom figure, possible halt, then close it at 17-20 pips profit.

Other way, there is no short cut for success. 1st automatic part can help in case of any dis connectivity. But 2nd part has to be manual.
Discussion is an exchange of knowledge;argument is an exchange of ignorance
  • #11
  • Mar 16, 2017 4:39am Mar 16, 2017 4:39am
Quoting PipPirates
Hello Members, Can you suggest any good trailing stop methods which is proven effective in long run? The traditional one cuts trades with whipsaws as its not price action based. What is your experience with trailing stops? Thank you in advance, Regards PP
PipPirates,

You can use volatility adjusted stops, something like ATR adjusted or Bollinger Bands adjusted. What you want to achieve is to protect your existing profits without getting whipsawed in violent moves/swings in order to be able to capture more of a move.

All volatility measures are back looking, so essentially you will be using something historical to estimate the future, which will work well in some times & fail in others.

A simple ATR adjustment is to trail your stop loss by 1xATR everytime the instrument moves 3xATRs. Since ATR is dynamic and changing as you go, so you will need to continuously adjust, otherwise you can smooth ATR itself by an average (A small period average).

Since volatility is mean reverting in general terms, you would want to even adjust that 1/3 ATR ratio based on the ATR regime you are looking at. So when volatility is kind of low as measured by the ATR, you would expect a high probability of higher volatility, so you use let's say a 1/4 ATR ratio, but when volatility is high, you would expect it to mean revert back & go lower, so you adjust and use 1/3 ATR ratio, etc...
  • #12
  • Last Post: Mar 17, 2017 9:18am Mar 17, 2017 9:18am
Quoting narafa
{quote} PipPirates, You can use volatility adjusted stops, something like ATR adjusted or Bollinger Bands adjusted. What you want to achieve is to protect your existing profits without getting whipsawed in violent moves/swings in order to be able to capture more of a move. All volatility measures are back looking, so essentially you will be using something historical to estimate the future, which will work well in some times & fail in others. A simple ATR adjustment is to trail your stop loss by 1xATR everytime the instrument moves 3xATRs. Since...
Thank you narafa for your ATR trailing strategy. Well ATR Trailing EA's are widely available. I will try it.
Discussion is an exchange of knowledge;argument is an exchange of ignorance
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