[Question] How do you protect your trades?

Hey guys,

 

What methods do you use to secure profits in once a trade is open…. do you use indicators to work out where to put a trailing/dynamic stop loss, ie, EMA21, the value of the EMA determines the stop loss value, etc.

 

I’m using one right now, without any stop losses, but has a TP in there which uses a custom indicators’ value to determine the TP… It made ZERO LOSSES… however, their was ONE trade that never closed until some 50 or so orders later (it finally hit the TP)… but the floating negative on the trade was huge, in fact almost all the profit it previously gained… Ideally I want to find a way to prevent that from happening, even though it was just a trade or two that had floating losses of about 200 pips (which is crazy in real life, off a 15M time frame).

 

So what methods have proven themselves to work?

 

Can you guys comment on your chosen preference or what you’ve tried before that works, even if it wasn’t your perfect solution.

 

Cheers 🙂

 

Loz

I guess no one does?

Well, thats a quite complex question. I’ve been working on it on some years and have some possible threads.

The first thing is that its essential to make a difference on what price movement you want to trade with the certain strategy, and most people don’t do that. If its trends you’re after, the high risk-revard is usually a better aproach with a controlled risk. Many times swift breakevens just put you out of the trend. To securing a profit I don’t like lagging indicators, swing lows and highs are more accurate, and usually have a better resoult, but its better not to have them alone, but combined with some TP method.

 

The long waiting in a position is controversial, because in the meantime you wont make money and waste time. I thing even if the price moves in favor afer, it means that you entered early. But thats just my opinion.

 

The other part with the loose control, well it’s for range strategies, where the price is expected to come back the same place several times. Against a trend it sucks because as you said it, you’ll give back all you have earned in the last two month, or even more.

Of course you can hedge it, but that creates a gap with a frozen loss, which wildens if you realize the hedge profit later. So its also need caution.

 

I’m planning to make a new video couse deeper about strategy development, that will cover this througoutly. There are so many different ways that it can hardly be discussed here.

I’ll tell you how one of my best systems plays defense:

After reaching a certain ATR distance from entry price it takes a partial profit.
After partial profit it moves to break even.
After break even it trails stop.
There is a million ways to trail stop and play defense. This particular system trailed using the previous day’s low if it was a buy, or the previous day’s high if it was a sell.

Well, if it increase the results its good. Its a common combination, this partial close with breakeven, I’ve never tried it though. There are so many variations, it takes weeks just to optimize properly the SL-TP-Breakeven combination let alone the indicator periods, and other stuff.

 

Tom

Yes but if the system is robust it will be profitable even before optimization and I try only to do very light optimization because my systems are designed to be traded on multiple assets (5+ pairs, Gold, Silver, WTICrude). Same parameters for all assets.

For MA I will only optimize maybe 5 step… 5 10 15 20 25 30 and same for ATR all other indicators. Only takes couple of days.