subject: How To Trail A Stop Webinar Part 4 [print this page] How to Trail a Stop Webinar How to Trail a Stop Webinar
Transcript Part 4 of 5
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Mark Soberman: A couple of other questions here. Steve, youre asking, Its easier to learn in live trading which is true, and one thing with the HVMM, people are part of that as they know, we do several live trading sessions per week and Troy is actually live in the markets everyday in his single room kind of walking through all of us in real time as the trades are setting up so thats always something you can make advantage of. We have another question here from Peter talking about a three bar stop indicator that Will, one of our trading coaches create, which I do remember that. That was part of one of the trade assist that he came up with that might actually back on the UMT. Im not sure. Do you remember that, Troy?
Troy Noonan: I do. I think that he had it as a I think it was a side panel. I vaguely remember it but I because Im calling a live room, Im looking at a lot of charts and my charts are pretty small.
Mark Soberman: Right.
Troy Noonan: And so, if I remember right, I didnt have the real estate on my chart to display it or I found it to be a very helpful tool. If youre looking at one big chart, yeah, it was great but I got a lot of charts in front of me and so for me, I just I kind of rely on just, you know, visualizing and seeing. I use my horizontal lines actually for my tool. So
Mark Soberman: Yeah, and I will say its plotted plotted dots on the chart so and basically we do you know, its always good I think to understand the concept behind it and then Will said something that hes going to repost into the Owners Club so hell put that back out there for the HVMM if you want that if you happen to be on that so
Troy Noonan: Great.
Mark Soberman: -- so we did have programmed that. Earl, youre asking about the time frames for candlesticks. You said 1, 3, 5 minute. Just so you know, we virtually never use time intervals to day trade. We use tick bars, range bars, volume bars, pretty much anything but the time interval, were just not big believers in time interval. You use time interval when you swing trade. Not recommended at least in all of our work, in all of our testing and anything when you come to day trading. Let me see what we got here. Clark is saying, 144 tick on Russell, what do you use for S&P E-Mini? Do you use range bars? I mean you can use range bars for S&P E-Mini. You might want to try like 0.75 or even 1 point per tick. I dont know. Do you have any ideas on that, Troy? I mean 377 tick maybe. I mean its so much smaller in that market. The ticks you got to bump it up.
Troy Noonan: Yeah. I think that also because of the slippage problem and waiting to get filled, you need bigger trade setups. So I wouldnt do a 377 or I even think of 610 is too small. Id be looking at a 987 or higher. For my preference, if the trade setups are smaller than four or five points, then youre giving away too much in trade costs as a percentage of your overall trade in my view.
Mark Soberman: Right. And we have some questions on the spreadsheet itself and usually what we try to do is we go back to the learning center where you a lot of you signed up and we typically post a replay and use any supporting material so well try to get that out there. So, you know, Troy, there might be something to have them do like Corey do and she puts the video replay links up there and maybe have a link to one of the spreadsheets.
Troy Noonan: Oh, sure. I think we even did a training video on how to use it or something like that.
Mark Soberman: Yeah, well put something together so we can make sure weve linked out to that and well make a note of that. And Mark was asking about the recording which is, yes, we are. We did record and we are recording so the replay will be back out on the site. Just give us a couple of days on that. Roger is asking, Troy, have you done any testing with automatic trailing stops in addition to manual resets?
Troy Noonan: Automatic trailing stops, I have not. Im not sure how I would test for that.
Mark Soberman: I think what he if Im guessing, it might be something like, you know, if youre in a ForEx, if youre a MetaTrader, you can tell to trail like 15 pips back or 20 pips back. Im guessing its something of that nature rather than letting the structure of the bars be the trail, it maybe would use some kind of fixed value perhaps.
Troy Noonan: My thoughts are that markets are dynamic and one of the reasons we dont use time charts is because the time chart, the bar itself is not arent dynamic. It is actually builds at the end of a time frame, five minutes theres a bar, five minutes. So it doesnt matter how many trades take place, so its not dynamic but the system that were trading with is dynamic. So its self-adjusting and self-tuning to the market condition. So, you know, and Im kind of answering this question in a runabout way. You know, so we want to use charts like tick charts, range bar charts, volume charts because those are dynamic. The bars are being built based on some sort of dynamic behavior in the market and the trade strategy were using is also dynamic.
So I would think you would also want to have a trailing stop strategy thats also tuned to the exact market condition at that moment. To me, it strikes me as being a more accurate and better approach.
Mark Soberman: Yeah, I mean I think its a good point where we rely upon the structure of the way the bars are forming and allow us the market to kind of set some resistance and support back off that. It gives us more breeding room because what will happen is if you use a fixed pip or a fixed you know, range and lets say crude or anything else. Just what Troy is saying, youre going to have you might have where the markets get very active, the bars are very big, a three bar stop is going to go ahead and absorb that. Its going to realize that the range has gone bigger and its not going to get shaken out by a retrace, whereas if you use a fixed number of pips, that may very well have a very shallow, if you know Fibonaccis, they only retraces a third but because youre using that fix number thats not dynamic at all, you might get whipped out a lot easier.
So theres definitely times that can work and work well but I think youre running into the scenarios, like Troy is mentioning, where you got very different types of market behavior or range. Whereas three bar stop I think is going to be much more dynamic for people and Ive seen it worked really effectively in ForEx, in futures and stock. We use it on those of you who got the Ultimate Day Trading System, the free system on ForEx with the 50-minute bars, its worked effectively there to keep you in the market and those bars have all kinds of crazy sizes. You know, the pound-U.S. dollar a 50-minute chart sometimes is very small, sometimes is very big but those three bar stops really do a nice job to kind of keep you in with the noise.
Troy Noonan: And Mark, I would even say further that the opposite of that is that they will tighten up at the right moment as well.
Mark Soberman: Yeah, good point.
Troy Noonan: Because at the end of a move, you want you dont want to give back, you know, some fixed amount if you could have gotten out sooner and kept more of that profit. And so, you know, it works both ways. It gets you out quicker when you want to get out as well.
Mark Soberman: Right. Do you have any ForEx charts up now or you have BP or anything? A few questions on just, Does it work on ForEx? And the answer is absolutely because its just theyre just charts. I mean it really doesnt matter what youre looking at per se.
Troy Noonan: Yeah, sure. I mean heres a British pound chart. Its only 144 ticks. It could probably change it to a slower time frame. Its kind of noisy. I was going to show you a crude oil chart. Lets see, heres this might be a good example. So you see this move right here? Let me make it bigger.
This is unnecessarily a trade we would take but you can see the dynamics where you got all these small little bars and then these big long bars. So you want a trailing stop thats going to be able to keep you in the market and then get you out at the right time. So if you look at lets say that you got short somewhere in here and youre coming down, down, down, down, down, down, you get these spike moves to the downside. I mean if youre not marketing out and youre trying to stand for a bigger move, you know, what you dont want to give back too much. And if you look at this bar here, if this was your last bar at the time, this is making a lower high so you count that as 1, 2. 3. Your trailing stop is going to be way up here, you see? Thats too far.
You dont want to give back that much but notice how the three bars stop mitigates itself when it starts consolidating a little because when you finally get to this green bar here, which makes a lower high that becomes a new bar 1, 2, 3 and even the one next to it, 1, 2, 3 which allows you to bring your stop down, you see? And you end up getting taken out right here. And so you catch a majority of that move and youre only giving back some of it. The three bar stop did a really nice job of getting you out pretty much at the right time.
Is that a good example, Mark?
Mark Soberman: Yeah, I think its a good example. I mean I think Im with you on like a when were using this kind of time frame which is quick on ForEx, youre probably not doing a lot of trailing on a 144 ticks --
Troy Noonan: Yeah
Mark Soberman: -- on this one but, you know, you need to be looking for a little slower. Theres a lot of noise in ForEx. It quickly goes to targets and thats what we try to capture but I mean its certainly, you know, gets the idea across there.
Troy Noonan: Yeah, I totally agree. At 144, you wouldnt use that approach. But on this crude oil chart, this is a 610 tick and I wanted to show you this because here youve got this move down and you could see this big long bars. Each one of these bars represents quite a bit of, you know, profit. And so, after a move straight down like this, I mean how far do you want to take it? You could use your three bar stop and its going to keep you in for good portion of that trade. I mean you could hopefully you could see and make this bigger here.
Okay. So you could see here this little green bar is a higher a lower high, right? Right there is a lower high so thats 1, 2, 3 and thats where your trailing stop would be, right there. And it takes you out. But if you look at the distance between this low, 79.31 and this high, 79.67, I mean thats a 36 cent move. Thats a $360 that you gave back. I mean that may or may not be good, its just a matter of doing your back test.
So one of the things that Ive used is Ive taken the momentum indicator here, the sticker white line. You see this thinner white line in here? Thats a momentum indicator that I set to three. I made it much quicker and I found that on some strategies that I can use this to get me out at the end of a big move. Okay. Thats another one of the little tricks that Ive discovered when you have a fast moving market and you want to get out close to the end of the move, you can put on a faster moving momentum indicator. Its a cool little indicator. You just have to practice with it and know when to use it so it doesnt take you out too soon. So
Mark Soberman: Yeah, I think one nice thing about the three-bar is, to some degree, its a one size fits all. When you start talking about some of the somebody is using the indicators then, you know, theres been more, you know, testing involve and, you know, to kind of know how elastic you need and how sensitive you want that indicator.
Troy Noonan: True.
Mark Soberman: Max is saying he tested auto trail stop on second position 70% of the three X target on a ForEx six range, so I think hes talking about on I think I believe hes using HVMM going for the three times target. Im assuming when hes saying 70%, Im not 100% sure, Max, I understand this, you said 70% of the time it lasts the full trend your comments. So I think youre basically, if Im understanding correctly, you were using a on range bars a certain percentage of the overall target trailing back and 70% of the time youre capturing most of the trend in that move. If I misinterpreted that, Max, maybe just sort of resend that through and Ill clarify it.
Let me see what else we have. Again, its more questions here. Roger says, Thanks to you guys. Im now changing the range bars. Ill do some testing. We did a webinar on range bars. Theyve been our last educational webinar. I cant remember at this point but we did one not too long ago. Let me see if its actually on there. Yeah, if you actually go to NetPicks.com under the Learning Center, you can go to the Training Webinars and theres a replay that we did at the last webinar which was, There's More to Life Than Just Time Intervals, where we sort of take you through range bars, volume bars, Renko bars, just some other options besides tick and definitely other options besides time interval, which we dont recommend for day trading.
David is asking, Is it possible to have TradeStation use a three bar reversal stop? I dont know if Im following that exactly. If youre talking about the three bar stop that Will had programmed that, you know, would be something that would work inside of TradeStation, were not reversing, though, three bar stop. So thats not a stop and reverse that we do and not to say that there is, you know, not potentially other strategies that can work. Troy, Dan is saying, When you say the software adjust to the market, does that mean one day you have 144 ticks on Russell E-Mini and the next day 233 ticks?
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