Swing Trade Stops

Well, I did manage to spend a little time examining my ten most recently complete trades over this weekend. These trades represent positions that lasted a week or two normally. What's apparent to me is that I need to change the way I'm working my stops. Last year, when I was using a mechanical systems based on combinations of various TA tools, a broader variable stop loss tool gave me the best results. But now I"m trying to swing trade some fairly narrow channels. 8 out of 10 trades I've recently completed would have done significantly better if I had just kept the stop at a little below the prior days low. In general, the stocks I traded either made the swing in good time or broke down. Not many wandered about. In 8 cases, profits were higher, loses turned to gains, or loss turned to a much smaller loss had I used the prior days low or close to it. In one trade there was no significant difference in results and in one case the tighter stop did worse. But in general, it appears that if one is swing trading the channels I'm getting into, broader variable stops create an artifical handicap. Anyone else got comments on using stops when swing trading?

I like just below the previous minor low. Simple, uncomplicated, does the trick.

SB, In my work the entry and exit rules vary with how strong the trend is. In the best move imaginable- straigt up or down - one would not even need stops . The strenght of the trend is determined by the degree of separation between the moving averages, price's relation to the bands, depth of corrections and the persistent improvement or weakening of relative strength. Most of the methods involve oscillators to define pivot points. An up channel is nothing more then a succesion of higher and higher pivots. The simplest way of using initilal stop is to have it under the more recent pivot. Welles Wilder developed the Parabolic Price Time System that raises stops for every time increment in progressively larger steps. Some people (the Turtles) use volatility bands to get in and out. Certainlty Keltner Channels can also be used because a really agressive move will stay inside a K channel. As a swing trader one can't hope that the move will last forever so some strategy to take profits before the counter move begins unless the move is proving particularly promising. is as important as a good stop placement plan.The unfolding move reveals how strong the issue is compared to its industry and the market and to it's own prior price patterns. Using Combinations of Standard Error and Standard Deviation Channels one can measure the quality of a move which helps one make a decision which method to use. Sell some, sell at the bands, trailing stop or trend line trailing stop. Regards, F&D

Great response, Flyers & Divers. Seems to me that initiating a position is often easier than getting out "well." I guess that's my weakness, anyway. Agreed on gauging the strength of trend and of the issue versus its sector and the market as a whole. I like Wilder's Parabolic Stop too -- if just picking one method of stop placement, that's a good one, at least for nicely-trending moves. When I hear "swing trading," I get a bit of negative feeling, as if there's an implication that relatively short-term profits will be taken rather than holding for what might be a good position trade, or a long-term hold for that matter. There are quite a few very good short-term traders at TT alone, and no one time frame is necessarily better than another, per se. To each their own, and these are the days of low commissions and nimble traders, so hitting the quick moves and going to another issue to do it again may be great for some people. Yet if we take a position, and it moves in our favor and we take a profit somewhat "automatically," that smacks of picking tops and bottoms to me, rather than "be right and sit tight." Maybe what bugs me is defining ourselves as (only) "swing traders," rather than just letting our stops take us out of the market, as Sentient Being does. And maybe I should just remember that lots of times things don't trend very well, and that we all make the market. Best, Doug

Doug, Ideally one would use tools that account for the nature of the market on the time scale that fits one's own temperament - popular or not- at least that is what I've been trying to do. In my case it is VST and swing trading. I build all kinds of longer range scenarios but seldom stay longer then one swing eventhough the techniques are valid.. The complexity of trading progresses with the length of time scale. The absolute simplest is scalping. No stops, just be on the rithm of the market. Next is small intra day swings(VST). No need for stops, one is watching intensely. (1 and 3 min charts) One can do the above without any conviction, in fact better not to have any convictions. Life is simple for the scalper and VST trader. Next, swings of the 1-4 day durattion (15 and 60 min charts ) Good to have a loose stop, but one simply has to get out if it is not progressing properly even if the trade is not behind or if progressing too well. This is trickier because of changing market conditions and group dynamics. Best to do with revved up stocks. Daily swings (2hr, daily charts) One better has stops, and patience and tactics figured out. Regards, F&D

Thanks Doug, Ideally one would use tools that are tuned to the market on the particular time scale that suits one's temperament. At least that what seems to work for me. While I watch in awe how some members here ride longer waves the VST intraday swings to shorter daily swings are the ones that are natural for me. Regards, F&D

F & D, agreed that we should go with what's "natural" for us. I hear what you say on the short-term, and in these days of negligible commissions it's more true than ever. I used to trade off 1 minute and 5 minute charts and I still get a hankerin' for it every once in a while. Doug

Thanks everyone, lots to think about.