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Trailing Stops In Low Volatility Advances
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Trailing Stops In Low Volatility Advances

by The MoleApril 4, 2019

Yesterday’s little shake out provided us with new context which we can now leverage to tighten down our trailing stop. To some this may appear counter intuitive – why would one run a loose trailing stop and then raise it after a new spike low is in place? Well there is in fact method to my madness.

Very nice spike low we have no place now and I’ve advanced my trail a few ticks below it. But why? Well the general idea here is to always leave your campaign enough room to produce new technical context.

Which is more difficult when you’re dealing with a low volatility advance that doesn’t produce clear/retested corrective phases, i.e. dips you can use to advance your trailing stops. One approach, which I happen to favor, is to wait for 4R to be locked in and then trail 1R – 1.5R below MFE waiting for instructions.

When a shake out finally happens you either get stopped out at 1R and cut your losses at 4R plus OR you use the new spike low to tighten up your stop as you know have the benefit of additional technical context. Besides small downside corrections often increase the odds of continuation higher, so now you’re in a good spot to lock in that extra R or two.

This is one of the examples when discretionary trading can run circles around automated systems which would require a lot of intelligence to account for medium term volatility. It’s possible of course but most system traders invest a lot less in campaign management than entry taking.

Strangely it is not something I often see covered in the majority of trading related literature I have come across. The focus again is mostly on entry taking and alpha factor development. IMO that represents an inversion of priorities as campaign management as well as capital commitment are at least as important as a system’s entry logic.

New setups waiting below for my intrepid subs:

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About The Author
The Mole
Mole created Evil Speculator amidst the chaos of the financial crisis in early August of 2008. His vision for Evil Speculator is a refuge of reason, hands-on trading knowledge, and inspiration for traders of all ages and stripes. You can follow him and his nefarious schemes at the usual social media waterholes.
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  • Mark Shinnick

    Yep, values become quite askew with priorities inverted in this entry taking game. Many seek accumulation of significant positions in at least an intermediate trend while the entry taking habit became strongly conditioned.

  • Jason13

    Well after my last Palladium profit debacle, all I did was, as per GG’s scolding, was write “I will not take profits too soon” 100 times on the blackboard and then sat in “trailing stop” detention class for a 100 hours. Condition cured. LOL
    Sidebar- up about 50 handles on Palladium short this morning. Platinum and Wheat kicking ass too.

  • ridingwaves

    well, the trading gods caught up with me, might have slipped out early of some positions…CL still holding up..my little bio symbol is being left out in the cold of low volume…

    Gold is very appealing unless something else is happening unseen……huge support right below pps right now

  • Rightside

    Mole what is the trend day alert today?

  • http://gerb-reloaded.blogspot.com Gold_Gerb

    sometimes the lessons learned, are FAR MORE PRECIOUS, than the $$$ lost.

  • BobbyLow

    I think /CL is beginning to break down a little bit. We’ll see if it really happens. OTOH, if price begins to rise again and breaks yesterday’s high of 62.99 then that’s another story. But if it breaks down enough, I’ll close what’s left of my Long and Flip to a short.

  • ridingwaves

    money lost? Or further gains not realized….

  • http://gerb-reloaded.blogspot.com Gold_Gerb
  • http://gerb-reloaded.blogspot.com Gold_Gerb

    I had a chance in 1989, to pay down debt, or buy Microsoft. don’t remind me!!

  • BobbyLow

    Setting the correct Trailing Stop on Average is an art all by itself. If it’s too tight then you might get stopped out too early and have the pressure of deciding whether or not to get back in. If you set your trail too deep then you might give back too much on some type of market jolt on your stop.

    Another thing is that a hard trailing stop builds from the last high or low depending whether long or short. So sometimes when price gets close to your stop a tiny little stop run can take you out. So what I do now is re-evaluate my stops 3 Times per day and use a little discretion as to where the most logical place is to place my stop. Sometimes, just because price has moved in my favor it might not necessarily mean that I move my stop along with it. It all depends on what the rest of my chart looks like.

  • Mark Shinnick

    Looks like a 20 objective to me.

  • Jay Thomas

    FWIW, I consider seasonality to be nothing more than a gentle wind blowing whichever direction. I ignore all but a half dozen outliers. According to my notes, calendar week 15 (next week) shows that S&P is up 80% of the time and by a good margin – the best week of the year, so this wind is stiffer. IIRC, it is because banks are reporting earnings.

  • http://gerb-reloaded.blogspot.com Gold_Gerb

    ..unlike options expiry the week after.
    😉

    https://www.youtube.com/watch?v=8ZH9ebAZouk

  • ridingwaves

    interesting place right now in equities…..RUT is butting up against that long term cycle line I use again today, why I took 1/2 IWM off and Q’s yesterday…..I think a down move before any trade news makes sense but not cents per se if it doesn’t happen

  • HD

    good eyes! last year SPX +70 handles week 15

  • HD

    the truth about stops, no stops go untouched in the S&P’s

  • http://gerb-reloaded.blogspot.com Gold_Gerb

    they’re like little goldfish in a piranha pond, IMHO.

  • https://evilspeculator.com Sir Mole III

    It didn’t trigger? Grrrr….

  • http://gerb-reloaded.blogspot.com Gold_Gerb
  • ridingwaves

    one of these months TSLA will lose that 245 support and find 194….

    old short seller saying

  • BobbyLow

    Seeing the SPX and NDX red while the Dow is up another 100 Points. Anyone remember when the Dow being up a 100 Points was a big deal?

  • http://gerb-reloaded.blogspot.com Gold_Gerb
  • http://gerb-reloaded.blogspot.com Gold_Gerb

    I do, I think was 2008 or 2009.

    two words. ‘Defensive’ & ‘Bi-bifurcated’

  • ridingwaves

    with Pinterest and Uber IPO’s possible trade agreement, April is looking bullish. throw in what is mentioned below for next week….blow off top would be awesome…

  • http://gerb-reloaded.blogspot.com Gold_Gerb

    the dollar is settling down, bollinger constricting.
    could be a contributor?

    https://stockcharts.com/h-sc/ui?s=%24USD&p=W&yr=5&mn=0&dy=0&id=p66425325033

  • ridingwaves
  • HD
  • HD
  • BKXtoZERO

    Any of you commodities traders know if there are Gaucamole futures? I would like to be 3X long GUAC

  • BKXtoZERO

    Out of yesterdays TVIX. 24.75 to 25.10. The masters will not allow any of even shorter term moves to correct. Kind of boring. Holding 1/4 R from this area is all.

  • BobbyLow

    Glad I didn’t have my stop set too tight on Soybean Oil /ZL today. There was a bit of a stop run after 10 AM but my stop was wide enough to withstand the attack. In the end, Price closed just 2 Ticks off today’s high up 43 Ticks for the day and is solidly in the 29 Handle now. It’s at about +2 R and might be in a decent run but what the market giveth it can taketh awayeth in a heartbeat so we’ll see what happens. Commodities dance to the beat of a different drummer than equities and that’s why I like them.

    I’m still up on Wheat about +1/2 R but today’s mild rally sold off before the close. Wheat does this kind of stuff all the time so I’m still holding long.

    Still sitting on 1/2 Position in Oil but it’s either consolidating for another move up or it’s just tired and waiting to drop due to a lack of buyers. I don’t have a clue which one of these things will happen but I’m pretty sure price will let me know.

    I’m still long both the Financial Sector and the Bio Sector. Both are in profit but I think I’m going to send my Financial Sector Horse out to pasture at least for awhile. Of my 5 Current Horses, Financial is my slowest runner so it needs a rest.

    All in all, it’s been a decent day. 🙂

  • BobbyLow

    LOL

    Funny thing is that I’ve been trading Soybean Oil and really didn’t even know what it was used for. So I finally looked it up. Some farmer huh? 🙂

    So just in case someone else doesn’t know what Soybean Oil is:

    Soybean oil may be refined for cooking and other edible uses, or sold for biodiesel production or industrial uses. The processors bake the high-protein fiber that is left after the oil is removed and sell it for animal feed. Soybean oil is used in cooking and frying foods. Margarine is a product made from soybean oil.

  • Jason13

    Well I’m down here now….I could stuff a bunch in my suitcase to bring back and then ship to you.;)

  • Jason13

    This might be suicide but I’m taking this cable drop today to initiate some long positions. Brexit, Shmexit

  • ridingwaves

    Kahlua is the best thing to bring back and vanilla…..plenty of avocados here in the US…..

  • BKXtoZERO

    Restaurants are charging an extra dollar for Guac.

  • http://gerb-reloaded.blogspot.com Gold_Gerb

    I may offend some vegan’s.

    I’m an evil lunch eater!!

    https://cmga360dining.files.wordpress.com/2017/05/lhs-franklin-bbq-03.jpg

  • http://gerb-reloaded.blogspot.com Gold_Gerb
  • ridingwaves

    Gold may just break up, compelling it is, what say you master yoda?

  • http://gerb-reloaded.blogspot.com Gold_Gerb
  • HD

    Yes please!

  • ridingwaves

    same bounce at march 5th area, that pushed up for 30+handles previously…..hmmmm

  • http://gerb-reloaded.blogspot.com Gold_Gerb

    a bounce, but the same? much much weaker IMHO.
    if gold is going to run, get above the median first.

  • http://gerb-reloaded.blogspot.com Gold_Gerb

    I thought the Coug in Boston would cheer. (she’s a meat lover)
    ..but apparently she can’t find a bathroom with Wi-Fi!
    LOL.

  • ridingwaves

    momo is bullish per my lens….but I’m a pirate and gold, well you know…could go either way…

  • http://gerb-reloaded.blogspot.com Gold_Gerb

    yeah man, everybody has a different lens.

  • http://gerb-reloaded.blogspot.com Gold_Gerb

    proof positive ‘someone’ is reading EvilSpec.
    What are the odds of same photo in said week?
    Come on guys, some originality of content.
    are you a freaking BOT?
    that, or *I* am the scripted matrix avatar.

    https://uploads.disquscdn.com/images/21505e7b07828d8e644b11629210db74c71751aea4173c63190b5abbdeecb72e.png

  • Julie 35 – 25 – 36

    What a situation Boston is !
    JULIE

  • BobbyLow

    Flying into Logan Airport and then have to take a bus through the crazy traffic to get a rental car is a PITA. I grew up and used to live about 75 Miles from Boston. Oh and if you flew into Logan from the right direction did you like how it seemed like the planes wing came pretty close to touching the water? LOL

  • Jason13

    What do you mean, Julie?

  • Jason13

    Oh, are you in Boston?

  • http://gerb-reloaded.blogspot.com Gold_Gerb

    ..if I was a Russell speculator
    159⅓
    given the coil, anything may happen!

    https://uploads.disquscdn.com/images/37648f83f093ac23a42aeac71ca6a06a3bc6b3374f7ddf8cc30c9013049a0b2a.png

  • http://gerb-reloaded.blogspot.com Gold_Gerb
  • bankwalker

    vegan – old injun word – means lousy hunter …

  • http://gerb-reloaded.blogspot.com Gold_Gerb
  • BKXtoZERO

    This trade deal is going to be Beautiful! It is going to be great. A beautiful deal for beautiful people and it’s just going to be fantastic. Que the TVIX

  • http://iberianviews.blogspot.com/ catracho

    The Emperor’s New Clothes..

  • https://evilspeculator.com Sir Mole III

    Fortunately here in Spain we have Pedro ‘El Guapo’ Sanchez! 😉

    One reason why I shy away from political quibbling here is that we live in very cynical and confusing times. Nobody knows what to believe anymore, people are being bounced in all different directions, info-warfare and misinformation galore.

    We all bitch about politics and politicians but fact is that an upstanding well meaning person wouldn’t have a snowball’s chance to reach public office in today’s media world. Meaning maybe we shouldn’t so much look to the outside but reach at a mirror and look at ourselves – for our collective voting decisions and lack of priorities are to blame for the world we have created.

    The other reason is that, after studying human history, I realized that people have been moaning and bitching about their rulers for millennia now. Nevertheless the ruling class has always managed to take care of its own at the general detriment of everyone else – this has always been the game, love it or hate it. Nothing new under the sun.

    So the same people who were bitching about Clinton, Bush, Obama, and now Trump – they’ll still be bitching once someone else takes over. Meanwhile did anything substantial change in their reality? Did all that time quibbling about politics produce any change or result in any payoff? It’s a complete waste of time for anyone except the few people who manage to benefit from feeding the noise.

  • http://www.captainboom.com/ captainboom

    Wish I could up vote this more than once. It is possible to have a small effect on the system, but you have to put the time in.

    I actually reach out to my legislators when they have local office hours, and I call when there are bills of interest that I wish to comment on. Yes, I’m going to be overridden by deep pocketed interests, but if enough people in my shoes make an effort to provide the legislator with well researched solutions, they do listen, and you *can* have an effect.

    I speak from experience on this, as I was the person that got the ball rolling on a change in Michigan law back in 2006. Took six years to get it done, but the law is better now. Not as good as it could be, due to the aforementioned deep pockets, but better.

    I’m also an appointed local township official. NO ONE from the public comes to our meetings, unless they are there for a personal matter that affects them or their immediate neighbors, or to bitch about a perceived problem that they usually have no clue about.

    When we did a major plan update last year, we had about 3 people who gave us their feedback, in a township of nearly 6,000 people. Then, when someone who did not put in any effort to understand our process and the laws we have to operate under doesn’t like the direction we take, they accuse us of collusion, of only paying attention to developers, and/or swear at us and call us names.

    Turn off the MSM echo chamber, do the research, think deeply, and give your local, state, and federal politicians substantive feedback and suggestions, and lastly, vote. It can make a difference.

    I’ll note that the further up the political food chain you go, the more important it is to develop a relationship with the chief of staff and/or legislative director. They often hold the real power, as they feed info to the legislator and can sway their opinion.