Registered User
Joined: 7/26/2010
Posts: 14
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Hi,what is the best trailin stop indicator plot you ever used with stockfinder ?
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Registered User
Joined: 6/15/2008
Posts: 1,356
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could you post some examples? not sure what you mean.
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Registered User
Joined: 2/21/2007
Posts: 797
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the one that gets the most profit.
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Registered User
Joined: 1/28/2005
Posts: 6,049
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One thing to remember, you stop loss goes hand in hand with your profit.
Wouldnt make sense for a day trader to use a 20% stop.
Wouldnt make sense for a long-term trend follower to use a 1% stop.
A stop is only half the equation.
Your best bet would probably be lookng into ATR to define stops and profit
targets. (with at least a 2 to 1 ratio)
1 ATR=Stop, 2 ATR=Profit Target..
1.5 ATR=Stop, 3 ATR=Profit Target. (and so on)
Thanks
diceman
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Registered User
Joined: 7/1/2008
Posts: 889
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I used to do a lot of backtesting with Vectorvest's pro grade simulator...testing numerous stock trading systems, and being able to test all of them with various types of stops. I tested every stop loss under the sun, but the one that seemed to generate the best results consistently was a 20% trailing stop.
So, a 20% trailing stop is my answer, assuming you are talking about position trading (not swing or day trading).
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Registered User
Joined: 1/28/2005
Posts: 6,049
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QUOTE (ben2k9) I used to do a lot of backtesting with Vectorvest's pro grade simulator...testing numerous stock trading systems, and being able to test all of them with various types of stops. I tested every stop loss under the sun, but the one that seemed to generate the best results consistently was a 20% trailing stop.
So, a 20% trailing stop is my answer, assuming you are talking about position trading (not swing or day trading).
That sounds about right. Technical Analysis of Stocks and Commodities had a study with a group of stocks and found 17 to 18% to be ideal.
That being said its been my experience that larger stops "freak" traders out.
Thanks
diceman
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Registered User
Joined: 2/5/2006
Posts: 1,148
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a trailing stop for what?
to lock in profits? or to bail on a failed trade?
i personally only use trailing stops to lock in profits after a price objective has been reached. sometimes a trendline or minor support break, might work, if there is a one within 10 percent, or so, of your total profits. or an macd signal line crossover, works well.
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Registered User
Joined: 7/1/2008
Posts: 889
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QUOTE (funnymony) a trailing stop for what?
In the case of the systems I tested, the trailing stop was to maximize performance of the total portfolio over a long period of time.
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Registered User
Joined: 2/5/2006
Posts: 1,148
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QUOTE (ben2k9) QUOTE (funnymony) a trailing stop for what?
In the case of the systems I tested, the trailing stop was to maximize performance of the total portfolio over a long period of time.
interesting, i've always thought of trailing stops being more of a tool for "momemtum" traders.
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Registered User
Joined: 3/21/2006
Posts: 4,308
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I agree with just about every comment here so far. Of course the best trailing stop is the one that will increase your profits but let’s try and be realistic now....
Yes it is true that a trailing stop is a great tool to insure a profit once price is actually moving in the direction of the trade. And yes you need to let a stock breathe and do its thing (price never moves in a straight line unless you are luck enough to catch a parabolic move)...
So where to put the stop loss??? I like the Dicemans idea of using ATR to gauge the hard number.
There are some of us that are lucky enough to be able to baby-sit our trades and watch them all day. I will say this, as it is the way that I like to use "mental" stops... If I am in a trade and the SPX starts to move against my trade and then my stock gives into the Market move, then I will exit the trade immediately. I will take the loss or profit. Many times after doing so the markets will turn back after bouncing off support (Intraday 5 minute charts). And I will re-enter my position and in most cases get a better entry price.
It is my opinion and only my opinion that using a hard stop and not being able to watch your trades during the day is a tuff thing to do because they will almost always get taken out. You see we are all alike and so we think alike and the market makers can see the herd mentality, they see where everyone has their stops in the same (obvious) place.
That’s it I am done. Notice how I did not give a definitive answer. This is because there is not one answer to this question. You have to find your own winning exit strategy based on trial and error and your own unique trading style....
Good luck
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Registered User
Joined: 6/15/2008
Posts: 1,356
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QUOTE (Bulard) Hi,what is the best trailin stop indicator plot you ever used with stockfinder ?
thought you referred to some indicator in SF.
Using Bbands ; period 10, StDev : 0.8 as my stop loss / trailing stop.
recently took a long position in NE, will bail as soon as Bbands turn red:
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Registered User
Joined: 6/15/2009
Posts: 6
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Jackie Ann Patterson from BackTestingReport.com gave a presentation at a Money Show recently that involved backtesting 7,147 stocks with 14 years of data from 1994 to 2008 with various exit strategies.The best she found was a Keltner Channel with a 20 MA and the channel set up with upper and lower plots at 3 ATR's. In fact increasing the ATR's to 4.5 did not increase losses.Take profit at the upper channel and exit at the lower channel.
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Registered User
Joined: 12/31/2005
Posts: 2,499
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I too have found that a 20% stoploss provides the best backtesting returns, disregarding the stomach acid factor.
The reason is that stops are typically loss captures. By setting the stop at 20% any losses of less than 20% have an opportunity to regain some of the loss. The sum of the regained amount exceeds the loss captured by an x% stop loss.
One other type of stop to consider is a linear degrading stop. Day one is at -20% and for each day of the trade it increases by some % . So after n days the stop would at breakeven and after 2*n days would be at a 20% gain. This type of exit can be paired nicely with a profit target exit to produce a workable approach.
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Registered User
Joined: 7/1/2008
Posts: 889
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QUOTE (jas0501)
I too have found that a 20% stoploss provides the best backtesting returns, disregarding the stomach acid factor.
The reason is that stops are typically loss captures. By setting the stop at 20% any losses of less than 20% have an opportunity to regain some of the loss. The sum of the regained amount exceeds the loss captured by an x% stop loss.
One other type of stop to consider is a linear degrading stop. Day one is at -20% and for each day of the trade it increases by some % . So after n days the stop would at breakeven and after 2*n days would be at a 20% gain. This type of exit can be paired nicely with a profit target exit to produce a workable approach.
but does it produce any better returns in backtesting than the 20% trailing?
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Registered User
Joined: 6/23/2008
Posts: 38
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The best trailing stop is one that never gets hit!
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Registered User
Joined: 7/1/2008
Posts: 889
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reductio ad adsurdum
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Registered User
Joined: 5/1/2007
Posts: 158
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QUOTE (LCRX) The best trailing stop is one that never gets hit!
Not necessarily. What if you Stoplossed MSFT at 20% below entry? Ten years of nothing. In real life, I'd look at the charts overnight, and adjust accordingly. My mental stop-loss points are often 2% below entry, because that usually means I made a mistake. I'll keep in mind 20%, entry and trailing for future back-testing.
However, I chickened out on AMZN and THOR, and it cost me. Both profitable, but could have made more. But the tape was (in my mind, plus some objective numbers) starting to look seriously overbought.
My formula involves taking the log, assuming I had 50% invested in one position.And that is what keeps me out of the cheap seats (stocks under $20) usually.
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Registered User
Joined: 6/6/2005
Posts: 1,157
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What if you Stoplossed MSFT at 20% below entry? Ten years of nothing.
This is why it's important to incorporate a time stop into your method. I do this by looking at the types of stocks I trade and the type of movement that I'm looking for and backtesting and live trade record keeping has given me the distribution of time periods in which those moves occur. For example, I know that 90% of the moves I'm looking for occur within 60 days so I have a hard stop at 60 days and many times much sooner if nothing is happeneing. Most of the time if some type of initial move has not occured by 20 days the trade is closed.
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Registered User
Joined: 12/31/2005
Posts: 2,499
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QUOTE (davidjohnhall) What if you Stoplossed MSFT at 20% below entry? Ten years of nothing.
This is why it's important to incorporate a time stop into your method. I do this by looking at the types of stocks I trade and the type of movement that I'm looking for and backtesting and live trade record keeping has given me the distribution of time periods in which those moves occur. For example, I know that 90% of the moves I'm looking for occur within 60 days so I have a hard stop at 60 days and many times much sooner if nothing is happeneing. Most of the time if some type of initial move has not occured by 20 days the trade is closed.
The decreasing stop of x% and essentially a timed exit since if the price isn't moving more than x% per day the stop is closing in on the price.
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