Teach Talk Trade Day Trading & Technical Analysis

Using and Understanding Trailing Stops

Once you get in a trade you hope the price immediately starts moving in your favor.  If so, you need to execute your plan, and if this includes trailing stops, then put your plan into action.  there are a couple of ways to do this.  With online trading it is easy to use a trailing stop that is continually modified according to the price action.  Lets say your trading plan calls for a $.50 trailing stop.  When you enter the order you will initiate the trailing stop which will be $0.50 below the entry price, As the price moves up your trailing stop will also move up.  In the purest sense, you would just leave this stop in until you get stopped out.

If your trading plan includes moving a stop up to a breakeven level after a certain profit level, then you would put in an initial stop and move it up manually following the price action.  You will never be hurt taking a profit or breaking even.  You have to be careful since taking small profits will not make up for the losing trades with larger stop losses.  If you place your stops too tight then you will be stopped out will very little profit.  The overall  game plan is to cut your losses and let your profits run.

If I am day trading in my online account, one of my plans is to lock in a breakeven level as quick as possible and then watch and trade off the candle formations in different short time frames like the five, ten, 30 and 69  minute time frames.  If I see that the trend is breaking down I will lock in a profit or smaller loss.
There are many ways to use trailing stops and there are ways to reduce risk with multiple contracts and using trailing stops.  Teach Talk Trade will educate you in these type of trading methods and philosophies.

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