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Registered User
Joined: 10/22/2007
Posts: 47
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I'm having a problem figuring how the trailing stop is calculated. Is it based on the close of a day, or the high of a day? If I use a trailing stop of 5% and set the program to exit at open of the next day, I can never get close to the 5% calculation, no matter what I base it on. So, in my roundabout way I am asking - is it based upon the close of a given high close day * 5% retracement AND the close following the high close day, or if the price passes thru the 5% retracement and closes above the 5% retracement anyways? Sorry, I don't know how to ask the question any simpler. Thanks from Tom Ferderbar
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Registered User
Joined: 10/22/2007
Posts: 47
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Sorry, I am using the BackScanner program for these calculations!! Tom Ferderbar
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Worden Trainer
Joined: 10/7/2004
Posts: 65,138
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Trailing Stop - This condition is based on any drawdown that occurs during the trade. You can set the percent drawdown to any value you like. This rule will fire if, at any point during the trade, the stock has a drawdown that exceeds the percentage set. The drawdown is measured from the highest high of the trade (so far).
So on a Long Trade, it would trigger whenever the Low of a Bar is more than the percentage set below the Highest High of any Bar during the Trade.
-Bruce
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Registered User
Joined: 10/22/2007
Posts: 47
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Thanks, Bruce. Using BackScanner, I "buy" AFAM at open on 7/9/08. The only exit I have in my rules is to exit at a trailing stop of 6% on open of the next day. It rises to a high of 28.22 on 7/9/08, and the low of that day is 27.30. I have the BackScanner trailing stop set to 6.00%, so it did not drop 6% that day (it would have had to drop to 26.526 that day and the day's low was 27.30), yet it exited at the open of the next day ($27.84). I'm sure the computer is correct and I am wrong, but what is wrong with my thinking that I should still be in the trade? Thanks again from Tom
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Worden Trainer
Joined: 10/7/2004
Posts: 65,138
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AFAM reached a High of 28.26 and a Low of 26.24 on 7/9/2008. 94% of 28.26 is 26.5644.
-Bruce
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Registered User
Joined: 10/22/2007
Posts: 47
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I see - I bought it at close on the 9th, but the program still looks at that day's figures in determining the 6% trailing stop, I suppose. But, since I have the trailing stop to exit at open of the NEXT day (which would be the 10th), it really can't do that calculation because it somehow has to use the 9th as the day at which the stop could be recorded (or something like that?) and hence, exits on the 11th. I had been looking at the 10th for the 6% trailing stop to have been broken, since the exit is set to the o pen of the next day. Anyyways, I think I understand it better now. Thanks for your wonderful, short, and accurate explanations. Wish I could do the same. Tokm F.
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Worden Trainer
Joined: 10/7/2004
Posts: 65,138
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You're welcome, but your description of what happens seems to differ between your Thursday, August 14, 2008 11:42:48 AM ET and Thursday, August 14, 2008 11:58:56 AM ET posts. I'm not sure my answer addresses the circumstances described in the second post. If you want, you can Share your Layout and I'll take a look and see if I can figure out what is actually happening.
-Bruce
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Registered User
Joined: 10/22/2007
Posts: 47
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You are correct - I do this to keep you on your toes!! Actually, I forgot that I had the progrm set to buy at the close of the day that my entry signals turned positeve. I think I get it now - Since I bought at close,, it still used that day's high and low in its calculations, but couldn't use them until the next day, and so exited the after it DID use the calcualtions. I am not as good simplifying things as you are, but I think I understand the process now. I did just now SHARE it if you want to look at the chart. the trade is the one in blue.
Tom
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Worden Trainer
Joined: 10/7/2004
Posts: 65,138
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You would need to Share it as a Layout instead of as a Chart for me to be able to view the BackScan. That said, if my understanding of your analysis is correct, you seem to understand what's probably happening.
-Bruce
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