|
In the Trading Tutors Newsletter #180 we took a look at one of the new tools added into the V3.6 Upgrade of ProfitSource – the Trailing Stop – Percentage . This week we are going to check out the Trailing Stop – Price.
Money Management is such an important part of anyone’s trading plan so any tool that helps you stick to your plan is gladly accepted. What makes both of these tools great, in my opinion, is the fact that they show up graphically in your trade chart. What this means is that instead of just writing your stop down on a piece of paper, or thinking about a stop loss area in your mind, you can see exactly where your stop is on your chart and make any necessary adjustments to your trade on a daily basis.
Now the Trailing Stop – Price tool is similar to the last article I wrote, however I thought it was important to cover both stops individually as there are a few subtle differences. Obviously the main difference is that this tool trails behind the stock at a set price based either on the high, low, open or close price depending on the user’s preference.
Jumping back to the pre-computed scans on October 4th 2006 I have selected a Wave 4 Buy on Thermo Electron Corp (NYSE:TMO) to use as an example. Selecting the Indicators Toolbar you will see that I have selected the TS$ tool (see diagram below).
Chart 1 – TMO Daily Bar Chart
click chart for more detail
Entering the trade on October 5th I have selected a 60 cent Trailing Stop. Go into the Properties section of the tool by simply double-clicking the description in the top left-hand corner of the chart where it says Thermo Electron Corp – Trailing Stop – Price.
The diagram below shows where you can make some adjustments such as whether the position is Long or Short, the entry date, stop loss based on High/Low (depending on a Long or Short position), open or close and also the Point Size and Point Distance. Here is where you can really customize it to your preference. In my example I have chosen a 60 cent trailing stop, but in fact there are a few different ways you could input 60 cents into the properties.
Below you can see I have made the Point Size = 1 (in this case a point represents $1) and in the Points Distance I have made it 0.6 (or 60% of $1 = 60cents). I could also have made the Point Size 0.1 (or 10cents) and made the Points Distance 6 (6 times 10cents = 60cents). Or even simpler still, make the Point Size 0.01 (1cent) and the Point Distance 60 (60 times 1cent = 60cents).
click chart for more detail
I think you are probably getting the idea now, so enough of my calculations! Further to that you can also move into the next tab labelled Plots and adjust colours and style of how you would like the trailing stop to appear on your chart.
You can also use this new Trailing Stop in conjunction with the System Testing module of ProfitSource!
click chart for more detail
So check it out and give it a go in your back testing.
Good luck with your trading!
Neil Gladwin
|