How To Trail A Stop Webinar Part 5
How to Trail a Stop Webinar
How to Trail a Stop Webinar
Transcript Part 5 of 5
Troy Noonan: No, Im referring to the same time frame day after day after day but the volatility is being taken into account by the actual trade system. The system itself is adjusting so were not changing the time frame of our chart. Does that make sense?
Mark Soberman: Yeah. A question from Richard on crude, What range bar do you use when you want to trail positions?
Troy Noonan: Mark, do you want to answer that because I dont really use range bars.
Mark Soberman: Yeah, I mean
Troy Noonan: Im just pulling up a range bar.
Mark Soberman: Yeah, I mean I would say start with, you know, six cents, 0.06 before talking, you know, crude thats kind of one of the ones that weve, you know, been using so I would say. I mean youll get a relatively it depends, of course, you know, the time of the day, this is the time of day that you would trade crude and crude really needs to be traded typically 9:00 a.m. New York Time to about 11:00, 11:30, and then typically from 1:00 p.m. Eastern to about 2:30 Eastern but you can kind of see here Troy is showing you some of the ways that it can look when its really trailing and its moving nicely and range bars can do a good job.
As you could see, you can visualize even on some of the potential shorts here how it steps down pretty nicely on a three bar stop. Its not always going to do that so like any market, it doesnt always decide to take off and move. I mean you trail for like the reasons that Troy mentioned which is to capture those occasional big moves and those big moves can be worth three or four fixed targets that you just came through so.
Wayne says, I do not see these kinds of lines in MetaTrader 4 using the UST. Yeah, on the UST, youre not using its not the HVMM strategy so you would, of course, be using the trend lines which is going to look a little different than what you see here in our directional indicator, but the three bar stops would still apply. And if you may remember, you might want to go back, theres a post in the Ultimate Swing Trader blog where we talk about using trailing and usually actually what some other people are asked about which is that fixed pip trailing stop off, lets say the high, you know, long or the low in a short. And we actually take you through some suggested ways of showing that stop and reducing the risk. So its a little bit probably back in the archives but its definitely in there.
Let me see. Have about using the momentum for the trailing and exit when the bar closes above the MOM 11, the momentum indicator? Thats from Jerry. Do you want to answer that, Troy?
Troy Noonan: Okay. Using the momentum indicator like in this case, if you use the momentum indicator, it would have taken you out here.
Mark Soberman: Right.
Troy Noonan: Im not is that kind of what you mean?
Mark Soberman: I think because youre saying like maybe I kind of close below. I mean you can kind of see how you can brainstorm this in a lot of ways. If you commit that Hey, I want to add trailing to what I do. There are a variety of different ways to do and I think the three bar is a great place to start but theres no reason that you cant look on an indicator-based way. You just need to always realize youre going to give back thats why I think Troy, right, you mentioned a lot of times, Wait till you pass the fixed targets here, not shaking yourself out to soon before its gone.
Troy Noonan: Yeah. And also no trailing stop work 100% of the time. So some work when others didnt and another trader will be the opposite. And one think Ive noticed is kind of bazaar is that the three bar stop and the MOM, the 1 MOM end up taking you out quite often at the same price but maybe several bars later. So you might find that the three bar stop takes you out of a certain price and then 15 bars later or seven bars later or whatever, you get taken out on the MOM indicator and its the exact same price and youll see that a lot actually.
Mark Soberman: Yeah.
Troy Noonan: So its you want to use what you feel comfortable with. Heres an example of a long setup. Get in with that little blue dots and the target will put an arrow a line is right here. So I mean thats a nice trade but the three bars stop actually holds you in all the way I mean it holds you in. It gets you out all the way to here. You would have been taken out on this bar right where this arrow is.
Now, the momentum indicator would have gotten you out here. Its almost the same level. Its within as couple, you know, couple of cents. So theres no right or wrong way as long as you have tested it and you found it to be effective over a lot of trades.
Mark Soberman: Yeah, thats the key. Nothing is going to be 100% effective for you. We all wish it would be in trailing but its just does not exist. Michael is saying, Is there a limit on how far back you can go with range bars? This really depended upon if youre using TradeStation, if youre using MetaTrader, if youre using Ninja, what kind of history you have. Im not sure what the limitations are. On TradeStation, I know if you use Renko, I know weve figured out that it goes back 90 days. It may go back further on TradeStation if youve been pulling in the tick date long enough. So you should be able to get at least 90 days and then, of course, as you accumulate tick data by running those charts, I would think theoretically you might be able to go back further.
Jerry was saying that he started using time intervals but hes doing much better now. Success has improved dramatically comparatively speaking switching form time intervals to range bars. So definitely going from time to range or time to tick, youre always going to get a big improvement for you day traders out there. Is there something that you want to show there that youre drawing on the chart, Troy?
Troy Noonan: Yeah, Im just Im illustrating to you three potential outcomes of the same trade.
Mark Soberman: Okay.
Troy Noonan: And I made this smaller so that we can see the whole thing.
Mark Soberman: Yeah.
Troy Noonan: So I mean this trade looked a lot bigger when we re-zoomed on it but this is your fixed target. Your three bars stop definitely, you know, not quite doubling your profit but pretty close to it. Imagine if you use the profit line to trail on this particular trade, it would have taken you out way over here so you might be able to device a trade plan. And remember, you always have to think about your risk parameters and your capitalization but lets say you can afford to put on three positions. And that three the sum of the risk equals about 2% of your overall trade capital.
You might have one coming off at your fixed target, one coming off at the three bar stop and one thats a little more experimental that you have on there to catch the really large move if and when it does happen. And, you know, you could use maybe this profit line. And like I said earlier, it could really hold you in for some really big gains. Imagine that that two of your trade cost on that trade. I mean you could have traded in and out and in and out. You could have had reentries and gotten back in and taking out of the fixed target, gotten back in, maybe gotten, you know, similar result but wouldnt it be nice to just have one trade with one small commission. The things to think about when youre formulating your trade plan.
Mark Soberman: Definitely. Peter asks, How do I get range bars from MetaTrader 4? And Peter, we provided EA script with our HVMM 2010 upgrade that enables MetaTrader to plot range bars. So obviously it would be a big deal to get out of having to do time intervals when you day trade so its something that we personally do provide. There may be other ways to do a two that are out there on third-party marketplace as well but we do try to make that standard now. So if youve been on HVMM, you can get it so that would be how you do that.
Let me see what else we have. A question from Dan K, Discuss the percentages you use in your back testing. Im not 100% sure I understand the question, do you, Troy, with more detail.
Troy Noonan: The percentages that I use, well, Im using a winning percentage. I mean thats something Im using. Using that Im also
Mark Soberman: Then you have to win a percentage to be a certain level like elsewhere, right?
Troy Noonan: Yeah. Im definitely looking for something in the 60s, the higher the better. I figured 70% is a dream come true if you can capture that and hang on to it then youve got a pretty special trade strategy. But if youre anywhere in the 60s, youre doing great. I mean we have had 400% return on last year on one of our strategies over 700 plus trades and, you know, that was a 62% winning percentage and that was after trade costs.
Mark Soberman: Right.
Troy Noonan: So, you know, dont shy away from something in the low 60s, that could be a very winning strategy.
Mark Soberman: Yeah, and were trying to be obviously realistic. This isnt about trying to like we always talk about in our presentations. I mean we are not going to talk it all about, you know, 90% winning and 100% winning and things that a lot of you guys experienced elsewhere because were talking about trade plans here that have stood the test of time and that you actually trade real time and not just, you know, in back testing and theoretical and hypothetical so thats always important to keep in mind. If you can win two-thirds of the time, youre doing great as long as you control the risk side of everything.
Somebody is asking the dollar value on these futures trades. So its $10 per penny so if were going for lets say 18 cents on this, you know, three times the range, itd be $180 per contract and then, you know, obviously, Troy was showing the overall move is in this case, you know, youre looking at where is the long in this one? Troy, this is long for
Troy Noonan: It was long I think from 79.31.
Mark Soberman: Yeah. So, you know, this is over a dollar so this one is a big move. Its going to be over $1,000 move. So nothing that you should typically expect when youre trading this market but youd be surprised. I mean, these markets just like ForEx, as you guys know too, when they really start to take off and you get on the right side of it, it can be big. You just sometimes have to wait several moves to catch a bigger move. Its not going to happen on every swing.
Troy Noonan: Yeah, then also, just look at the distance from each of these exit methods. You know, your fixed target got you what, 18 cents and then you got 36 cents on your three bar stop but it was the big profit line slower moving trailing stop but look at the volatility of the ups and downs. So I mean it actually was way up here. You gave back a lot of profit finally when it finally took you up finally took you out but it still resulted in, you know, over a dollar like you said. Just different ways to skin the same cat.
Mark Soberman: Definitely. Lets see, When I type in ATCL, I do not get a chart at TradeStation. You may have to subscribe to the exchange. Youre going to need the NIMEX. That may be the reason why if youre not pulling in data but you should normally get the delay data if nothing else but its quite possible you need to complete, Maria, the form on the site and, you know, prove that exchange in order to get the data so that should be a problem.
I think we probably should wrap since weve gone for a while here. Ill probably type in a few more answers for those of you who are still typing a few questions. Ill hang in for a couple more minutes and then Troy, Ill give you an opportunity to close it out. Any other closing comments you want to throw in there?
Troy Noonan: I guess the only thing I would say is that, dont just jump into this, you know, shooting from the hip. You really want to research it out, flush out your strategy. But once youve done all that, you feel pretty confident then you want to make sure you can execute it because you have to learn how to manage two positions and move in your stops, and what if youre moving your stops to different levels on each position separately? Those sorts of things you want to work out in a sim account. Make sure you can execute it properly. Dont make those mistakes and discover you dont know what youre doing with real money on the line in live markets. So I would leave you with that thought I think.
Mark Soberman: Great. Well, thanks a lot, Troy. Thanks again everybody for joining us today and we ran a little bit over the hour but hope you got to learn something from here that you can put to use and at least nothing else make you think about some of the opportunities. Thats one of the great things about trading, theres always another challenge, theres always something else you can do to improve and optimize your results. So thanks again, everybody. Take care.
Troy Noonan: Thanks a lot.
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by: John Jay
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