February 25th, 2020

At the close of the market February 24th there were no trades triggered. I thought it was worth expanding on the “trailing stop”.

S&P 500

We were stopped out of our trade in the S&P by way of a trailing stop. As you can see from the last candle on the chart yesterday, the market took a bit of a downer. We always use a stop with every trade. A variation on the protective stop is a trailing stop. The regular stop is simply a price below our trade (if we are short, it would be above the trade, but let’s not confuse you at this point). It is a point at which we think we maybe wrong with our trade. Not us, of course, the market – we are never wrong. They key to a protective stop is not to just put it anywhere. There are intelligent places and as you gain experience, you will spot the difference.

So, to the trailing stop. If we have a stop that we have set at $20 below the market price. That stop is static until we move it. We do move our stops as part of our process. If we set a trailing stop at $20 below the market price and the market price moves up, so does the trailing stop. If the price goes up to $200, our trailing stop has moved up like a faithful Sherpa to $180. If the price falls back, the stop stays at $180. If the price drops below $180, we are stopped out. As I have mentioned a number of times, the point of a stop or trailing stop is to take us out of the process. Left to our devices we would think it over and maybe decide with that hoping and wishing thing we have that maybe the price will come back. How else do you explain people holding onto all kinds of examples of the price falling for miles and still believing. I cover this in Basic Trading: Book 1. You can get it for free: https://charlesgoddard2020-f52a.gr8.com. As a trader you can make a point of using trailing stops with every trade and watch your results improve.

The symbols we are watching are all continuing without triggers. Oil may cross today. That, however, would involve a short sell. Since many of you are not prepared to go short at this point, I will show you an alternative. Probably tomorrow.

Leave a comment

Leave a Reply

%d bloggers like this: