Quote:
Originally Posted by PippinTom
Hello David,
Here are my explanations about using the 10-pip trailing stop:
1.) When the chart hits a gain of 20 pips my new stop level will be the same with the
price where I initially enter the trade. This means that once I hit the 20-pip gain
there is a 100% guarantee that I will not experience a loss even if the market
reverses because of the 10-pip Trailing Stop.
2.) When the chart hits a gain of 30 pips my new stop level will be 10 pips higher (for
a BUY position) or 10 pips lower (for a SELL position) than the price where I
initially entered the trade. With this there is a 100% guarantee that I will still get
a profit (even though if it is only 10 pips) if the market reverses.
Yesterday was the third day I am using my proposed technique and so far I am continuously getting profits. I observed that there is a higher probability of me getting stopped-out at a loss if a set the Stop order to 10 pips or less.
Regards,
Jeff
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Hey Jeff,
Ok that makes sense to me now. Well it sounds like you have outlined your criteria for entering the trade, managing the trade once you are in it, and exiting the trade. Those are the three main components so the next stage is to test it as it looks like you are doing now.
There are two ways that I would recommend testing a strategy such as this. One is what you are doing trading it in real market conditions and the other is to backtest it using a software such as Tradestation or Metatrader.
The main thing that I would look for in the backtest is how it performed under different market conditions ie when the market is in a trend vs range, under high volatility vs low volatility conditions etc.
Shaun Overton is writing a nice series on how to do this where you should be able to pick up some tips if interested.
If you would not mind keeping us in the loop with how this goes with a post or two in the future I would love to hear and I am sure others would appreciate the ability to follow your progress as well.
Best Regards,
Dave