Posted by falcon5678 on 26th of Jun 2012 at 09:58 am
Matt, I was just wondering about trailing
stops. We often talk about playing breakouts here but
if my style is to take profits on the way up but also stay in the
trade and not get shaken out how do I set a trailing
stop? What amount should it be. For example
if I'm trading a $30 stock. Is it a percentage of the stock
price or does it also depend on the volatility of the
underlying?
Posted by morton13 on 26th of Jun 2012 at 11:02 am
After watching HZNP take off on me I'm currently taking 1/2
profits when the target is hit and then using 9day ema as trailing
stop for the other 1/2....close below and I'm out completly as I
figure the trend may be changing...and then will wait to see if
another patten presents itself for another trade....If the target
isnt hit yet then taking profits (hopefully) on 1/2 when the 9 day
ema is lost and selling all if 20 day ema is lost. If a stock
is making new highs along the way I may give it more leaway as
there is not much overhead resistance to contend with. See
WPRT dailywhere I've been in since 26 and
change and its been riding the 9 day ema. hope this
helps.
Posted by falcon5678 on 26th of Jun 2012 at 12:06 pm
Thanks Morton - that is food for thought. I'm
worried that the 9 EMA might be a long way down on some
charts. For example the 9 day on POT is 2.50 below
where it is trading now. I would hate to see that kind
of drop before getting out. Do I need a faster EMA?
falcon5678 - an answer to your question is to shift to an
intraday chart moving average (like at 20 or 50 ema on the 15
minute chart) versus a daily chart. You can also look to take at
least partial profits on a quick extended move on part of your
shares and consider buying back on a pullback that is followed by a
buy trigger.
Posted by falcon5678 on 26th of Jun 2012 at 12:43 pm
Thanks Steve. So I could sell a little on the way
up, perhaps look to buy it back at the 20 ema on the 15
minute, but if it breaks below that ema look to sell it
all. I'm just trying to find better ways to take
advantage of those panic buys. The worst thing I do is
take myself out of good longs just because they are going
up.
I am sure Matt will chime in here but I wanted to give some
thoughts. Ideally you find some technical reference for a
stop. Maybe it is the previous resistance which is now
support or possibly a Moving Average that has tracked well.
It can also be a case where at first it is the Support (prior
resistance) and then switches as an MA catches up etc.
Otherwise you should define your risk in some manner and have a
condition by which if reached you say that's it and I will come
back to the name later. It has been a while but I use a rule
that I got from William O'Neil (IBD founder) in one of his
books. Look for trades with a 3:1 reward:risk. I
believe his reasoning was then if your right 1/3rd of the time your
a break even trader (it has been a while so maybe it was 3.5:1 or
something but the general gist is correct - if I still have the
book maybe I can loan it out to interested members). So the
rule would say that if the pattern I am playing is calling for $3
upside if reached then my max downside would be $1. Sometimes
you can find a technical level to match that downside risk and
those are my favorites (also a rule I use when scanning for Watch
List ideas).
The negatives? That is more a rule for swing trades and
not day trading. In a volatile market or counter trend trade
any swing trade is going to be difficult to navigate and often you
could see stops hit and then price immediately move back up (or
down depending on if your long or short). Since your coming
from the angle of having profits in the trade it sounds like your
treating it in the appropriate fashion - lock some gains in and
then now just look for a close technical area to use as a
stop. One trick I will sometimes use in a situation where for
whatever reason I have a profitable swing trade but when I look at
the daily I have no clear trailing stop except to just use my entry
point (which likely coincides with the break point) then I may use
that but knowing I really don't want to see it get all the way back
there I will switch to a longer intraday chart like a 1-2 hour and
then once I have a good reference point on that chart I may change
to that price.
Just some thoughts for you to use as you see fit. Hope
that helps!
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Matt, I was just wondering
DBA and Agriculture Sector
Posted by falcon5678 on 26th of Jun 2012 at 09:58 am
Matt, I was just wondering about trailing stops. We often talk about playing breakouts here but if my style is to take profits on the way up but also stay in the trade and not get shaken out how do I set a trailing stop? What amount should it be. For example if I'm trading a $30 stock. Is it a percentage of the stock price or does it also depend on the volatility of the underlying?
Hi Falcon
Posted by morton13 on 26th of Jun 2012 at 11:02 am
After watching HZNP take off on me I'm currently taking 1/2 profits when the target is hit and then using 9day ema as trailing stop for the other 1/2....close below and I'm out completly as I figure the trend may be changing...and then will wait to see if another patten presents itself for another trade....If the target isnt hit yet then taking profits (hopefully) on 1/2 when the 9 day ema is lost and selling all if 20 day ema is lost. If a stock is making new highs along the way I may give it more leaway as there is not much overhead resistance to contend with. See WPRT dailywhere I've been in since 26 and change and its been riding the 9 day ema. hope this helps.
Thanks Morton - that is
Posted by falcon5678 on 26th of Jun 2012 at 12:06 pm
Thanks Morton - that is food for thought. I'm worried that the 9 EMA might be a long way down on some charts. For example the 9 day on POT is 2.50 below where it is trading now. I would hate to see that kind of drop before getting out. Do I need a faster EMA?
falcon5678 - an answer to
Posted by steve on 26th of Jun 2012 at 12:20 pm
falcon5678 - an answer to your question is to shift to an intraday chart moving average (like at 20 or 50 ema on the 15 minute chart) versus a daily chart. You can also look to take at least partial profits on a quick extended move on part of your shares and consider buying back on a pullback that is followed by a buy trigger.
Thanks Steve. So I could
Posted by falcon5678 on 26th of Jun 2012 at 12:43 pm
Thanks Steve. So I could sell a little on the way up, perhaps look to buy it back at the 20 ema on the 15 minute, but if it breaks below that ema look to sell it all. I'm just trying to find better ways to take advantage of those panic buys. The worst thing I do is take myself out of good longs just because they are going up.
Here's one that broke out and I got stopped out using the 9&20 day ema
Posted by morton13 on 26th of Jun 2012 at 11:27 am
CERN daily
seems though they benefited from Obamacare and now if overturned they will be punished...it seems.
Morton - thanks for posting
Posted by steve on 26th of Jun 2012 at 11:31 am
Morton - thanks for posting CERN - nice example of an evening star pattern playing out. (topping pattern).
Title: sorry, ended up longer
Posted by tom on 26th of Jun 2012 at 10:33 am
I am sure Matt will chime in here but I wanted to give some thoughts. Ideally you find some technical reference for a stop. Maybe it is the previous resistance which is now support or possibly a Moving Average that has tracked well. It can also be a case where at first it is the Support (prior resistance) and then switches as an MA catches up etc. Otherwise you should define your risk in some manner and have a condition by which if reached you say that's it and I will come back to the name later. It has been a while but I use a rule that I got from William O'Neil (IBD founder) in one of his books. Look for trades with a 3:1 reward:risk. I believe his reasoning was then if your right 1/3rd of the time your a break even trader (it has been a while so maybe it was 3.5:1 or something but the general gist is correct - if I still have the book maybe I can loan it out to interested members). So the rule would say that if the pattern I am playing is calling for $3 upside if reached then my max downside would be $1. Sometimes you can find a technical level to match that downside risk and those are my favorites (also a rule I use when scanning for Watch List ideas).
The negatives? That is more a rule for swing trades and not day trading. In a volatile market or counter trend trade any swing trade is going to be difficult to navigate and often you could see stops hit and then price immediately move back up (or down depending on if your long or short). Since your coming from the angle of having profits in the trade it sounds like your treating it in the appropriate fashion - lock some gains in and then now just look for a close technical area to use as a stop. One trick I will sometimes use in a situation where for whatever reason I have a profitable swing trade but when I look at the daily I have no clear trailing stop except to just use my entry point (which likely coincides with the break point) then I may use that but knowing I really don't want to see it get all the way back there I will switch to a longer intraday chart like a 1-2 hour and then once I have a good reference point on that chart I may change to that price.
Just some thoughts for you to use as you see fit. Hope that helps!