Trailing stop orders

[vindikation]

Do any of you use trailing stop orders in your trading?

I recently started using a 2% trailing stop order on my swing trades and it seems to be working out pretty well for me. One thing that noticed with trading stocks, is that much like poker, you need to find a "style" that fits your own personality. Quite an interesting journey. Again I'm a noob swing trader so any feedback would be greatly appreciated, thanks.

NOTE: I only use trailing stops on swing trades, my longterm investments have no stop orders.

well you have to adjust it to the volatility of the stock and the price of the stock too. you do a 2% trailing stop on TZOO and you'll get stopped out plenty.

[Sniper]

Trailing stops is an excellent way to protect your swing trades.

[vindikation]

Thanks for the feedback.

What % do you typically recommend?

1% seems to not cover daily variance and 3% seems too much to lose overall. I'd use 2.5% but I can only use integers at Scottrade, so I'm using 2%.

[Sniper]

Position sizing and Stops go hand in hand, and should vary based on the expected volatility of the stock you are trading, and the % of equity you are willing to put at risk!

[Packerfan1]

Started swing trading about a month ago. Current system is once my trade hits a 3% gain, I put in an trailing stop alert at 2% off the high.

I generally use alerts and "mental stops" vs. preordered when I'm available at the computer. If the trailing stop alert is triggered, I make my call then to sell or not.

I too am trying to find the right %, but I think you really have to take a stock by stock look at it. On Wed three of my holdings hit the target AND the trailing stop alert. I kept two of them (SWIR and VDSI) but took the small profit on one (LRCX).

As a side note, when I first started I used Scottrade as well. I switched to MB Trading after a couple weeks. Tough to make $$$ at $7 a trade compared to $1 or $2 a trade - plus the alert system is excellent on Quotetracker. I kept my Scottrade account because I want a backup and it allows me to backfill charts on QuoteTracker which is the interface I use for MB Trading. Just FYI.

Pack

[BarkingMad]

Another way to set trailing stops is to use a stop based on volatility, rather than a %. The general consensus among pro traders is that volatility stops work better than % because they are adaptive to current market conditions.

AverageTrueRange stops are one simple way to do it.

Here is some info on ATR from Chuck LeBeau's site:

Link

[ QUOTE ]
How to calculate Average True Range (ATR).

Range: This is simply the difference between the high point and the low point of any bar.

True Range: This is the GREATEST of the following:
1. The distance from today's high to today's low
2. The distance from yesterday's close to today's high, or
3. The distance from yesterday's close to today's low

True range is different from range whenever there is a gap in prices from one bar to the next.

Average True Range is simply the true range averaged over a number of bars of data.

To make ATR adaptive to recent changes in volatility, use a short average (2 to 10 bars). To make the ATR reflective of "normal" volatility use 20 to 50 bars or more.


[/ QUOTE ]

One way to use ATR is to "hang" the ATR distance from the Highest high achieved during your trade (for long trades). LeBeau calls this a 'chandelier' stop.