Trailing stop question - dual EMA or % loss?

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billpritjr
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Trailing stop question - dual EMA or % loss?

Post by billpritjr » Mon Jun 21, 2004 10:27 pm

I would like to ask the audience for input

I have been trading N-day breakouts on stocks and have been profitable. Examples of actual stocks owned are CALM, NVTL, MAGS, IPIX, CLCT.

I tend to place a "O'Neil" stop at the 7% loss point. However, over the last few months that has not been working, I am getting stopped out and then the freaking stock resumes its climb.

I am planning on replacing this with a 3/9 dual EMA stop instead, which ** appears ** to have some promise.

Can anyone offer comments or other suggestions?

Kiwi
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Post by Kiwi » Tue Jun 22, 2004 12:06 am

Many things become less effective over time. But rather than throwing the baby out with the bathwater why not try a minor modification.

1) Don't use 7%, find a slightly larger number.
2) If they fail reliably put your buy in at -4% and then use 7%
3) Half and half. Buy half on breakout with a 10% stop. Buy half at -6% with a 4% stop.

You get the idea. I use these strategies to scale into euro for day trading with average stop sizes of 3-5points where most people seem to have 10-20 point stops.

If you find it works well for you please do let me know as I might want to try it on stocks at some time :)

Kiwi

blueberrycake
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Post by blueberrycake » Tue Jun 22, 2004 12:56 am

The 7% number never made any sense to me, since volatility varies so much from stock to stock. 7% on GM is very different from 7% on TASR. I recommend you do something similar to the turtles, and use a volatility adjusted stop-loss (and also for position sizing).

-bbc

BigBrad
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Post by BigBrad » Wed Jun 23, 2004 12:59 am

You might also want to consider a multiple of ATR for each stock. When using Moving Average cross overs I've had success with 2 or 3 ATR stops as a stop loss (for positions that I'll hold about 2-3 months), and using another cross over for the "trailing" exit.

What timeframe of N are you using?

I've had success to the long side with this, but it never tested good for shorts so I don't trade it.

billpritjr
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timeframe

Post by billpritjr » Wed Jun 23, 2004 8:31 am

I am using 63-day breakout. (3 month) My scan is

NASDAQ
Todays Close is higher than highest high over the last 63 days
Todays Volume is > 60 day EMA volume X 2
Price $3-$25
Todays Volume at least 250,000

I use stockcharts.com for this scan.

Prior success with CLCT, IPIX, MAGS, CALM.

Even after I get a list with stocks that do indeed fullfill the criteria I eyeball the chart, check the IBD ratings, etc, before I buy. One breakout with A+ Group Strength and one with D- group strength, I go with the A+ one. Furthermore:

Less than 30M Shares outstanding
15%+ Inside ownership
1-30% Institutional ownership

thanks

:D

richard
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Post by richard » Wed Jun 23, 2004 9:54 am

I look at stops two ways: money management and technically significant levels.

Trading futures, I look at the chart and locate support and resistance levels, including the 20dMA, 50dMA and 100dMA.

I only go into a trade when there is a strong reason to put the stop fairly close, so if the trade fails it is obvious I am wrong, and I am stopped out rapidly.

If the stop has to be too far away based upon solid TA, then I don't do the trade at all.

Before this, I found I was setting stops that were too tight due to wishful thinking or not wanting to lose more than x%.

But the market never cared how much I wanted to lose! So now I look at my charts and discover the stops that are put there by the market.

This can rule out a lot of trades, which is fine of course.

I also look for target levels for the trade to rise or fall to, and expectancy based upon possible loss and possible gain, based upon those stops.

In addition, I use a multiple of ATR as an alternative loss calculation before I enter the trade, so I know either way how much I can lose. Especially with pit-traded futures, you can gap past a stop and lose more than you intended, so the ATR calculation helps assure me of how much I could potentially lose even if the market gaps past my stop.

With stocks, if you are doing channel breakouts, then your stops should be easy to figure out. If you are doing a breakout, you can set the stop to the bottom of the channel, or the middle, or the top, depending upon how aggressive you want to be.

I haven't done much of this with stocks but I am very interested in what you are doing.

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