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Trailing Stops In Low Volatility Advances

Trailing Stops In Low Volatility Advances

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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