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Trailing stops

  • #1
  • First Post: Jun 13, 2006 1:31am Jun 13, 2006 1:31am
I went long on USDJPY late last week and now I'm enjoying watching it run up tonight I closed out half my position this evening to preserve profits and set a trailing stop at 20 pips. But I had no idea if that was a reasonable level.

How can I determine a good distance for a trailing stop? Is there any rule of thumb or does it depend on the situation?

Dang I'm getting addicted to forex.

Squid
  • #2
  • Jun 13, 2006 1:41am Jun 13, 2006 1:41am
think of a trailing stop as a stop loss. If the current price fall 20pip then you're out.
  • #3
  • Jun 13, 2006 1:44am Jun 13, 2006 1:44am
Quoting nitman
think of a trailing stop as a stop loss. If the current price fall 20pip then you're out.
Thanks, Nitman. I do understand that. What I'm asking is how do I determine how far away to set the trailing stop? I just randomly chose 20 pips and it's worked out well tonight but I bet that isn't always the case.

Would average daily range help here?

Squid
  • #4
  • Jun 13, 2006 2:02am Jun 13, 2006 2:02am
Quoting Squid
Thanks, Nitman. I do understand that. What I'm asking is how do I determine how far away to set the trailing stop? I just randomly chose 20 pips and it's worked out well tonight but I bet that isn't always the case.

Would average daily range help here?

Squid
Size of trailing stop depends on the timeframe you work with. Are you a position trader, swing trader, daytrader or scalper?

If you bought YEN last week, then you must be a swing trader at the least. 20 pips is nothing for a swing trader. What is your target price? Do you have any idea where you say OK, I AM FINE WITH THIS AMOUNT OF PIPS and close your position or do you always wait for the market to kick you out?

I wouldnt hold a fixed-pips trailing stop but rather I would move the stop up/down in the direction of your position and try to place it below/above important support/resistence levels.

20-pip stop placed in the middle of nowhere is nothing in FOREX, you are lucky to be still in the market.
  • #5
  • Jun 13, 2006 2:09am Jun 13, 2006 2:09am
yes very lucky no new candle/bar fell 20 pips to knock you out
  • #6
  • Jun 13, 2006 7:35am Jun 13, 2006 7:35am
Hmmm, I thought placing a trailing stop would be a prudent thing to do. I had to go to sleep last night and wanted to prevent a disaster. As it turns out, I was stopped out when it retraced. It since is up another 20 pips. But I did get a nice 50 pip profit on this trade :-) I guess a larger trailing stop would make sense.

Anyway, it was my first time scaling out of a trade, and I like doing this. It was much easier letting it ride this long with my profit protected.

Squid
  • #7
  • Jun 13, 2006 7:39am Jun 13, 2006 7:39am
I am using trailing stops now myself. I had an errant trade last week, went up 100 pips then when plunge down 200 pips to put me in deficit. Now I am locking in profits as the price goes in my favour.
  • #8
  • Last Post: Jun 13, 2006 11:14am Jun 13, 2006 11:14am
Quoting ItalianSharp
Size of trailing stop depends on the timeframe you work with. Are you a position trader, swing trader, daytrader or scalper?

If you bought YEN last week, then you must be a swing trader at the least. 20 pips is nothing for a swing trader. What is your target price? Do you have any idea where you say OK, I AM FINE WITH THIS AMOUNT OF PIPS and close your position or do you always wait for the market to kick you out?

I wouldnt hold a fixed-pips trailing stop but rather I would move the stop up/down in the direction of your position and try to place it below/above important support/resistence levels.

20-pip stop placed in the middle of nowhere is nothing in FOREX, you are lucky to be still in the market.
I agree. Leaving stops in the middle of la la land is wasted possible profit in my opinion. I guess about a decent time to use a trailing-stop would be if you were away from being able to trade for a few days or more, at least then you could lock in profit when you are not able to manually.

Squid: I find scaling in and out great too. It allows me to "let the profits run" on at least 1 out of my 3 "lots". Right now up 327 pips on my last lot for the EURUSD. Of course its a good run from the worries on inflation here.
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