Trailing Stop, % Down

Table of Contents

These alerts are based on the idea of a trailing stop.  They will report when a stock price pulls back from a local high or low.  These highs and lows can happen on any time frame, they are not limited to candles of any particular size.

A trailing stop is a feature of many trading applications which helps you lock in profits.  The software will watch each of your positions.  Each time one of your long positions goes up, the software adjusts your stop loss.  If the prices moves back down a predetermined amount, you will hit the stop loss, and the software will automatically sell your stock.  The software constantly compares the current price of each of your long positions the highest price since you owned the stock.  Short positions work the same way, but the direction is reversed.

Trade-Ideas does not know when you buy or sell a stock, so we can not replace a stop loss.  However, we can approximate your stop losses.  To do this we assume that you always buy stocks when they are going up, and short them when they are going down.

The trailing stop alerts are similar to the pullbacks from highs and lows, and the Fibonacci retracements.  All of these alerts report when a stock moves in one direction, then turns around and moves sufficiently far in the other direction.  Trailing stops are different because they work on a shorter time scale and typically report more often.  For the pullbacks from highs and lows, the turning point must be a new high or low for the day.  For the Fibonacci retracements, the turning point must be a volume confirmed support or resistance line.  Trailing stop alerts, like real trailing stops, will allow even a single print to serve as the turning point.

The first trailing stop alert will occur when the stock moves at least 0.5% down from the last high or up from the last low.  The stock will produce another alert each time the stock continues in that direction for another 0.25%.

The there are three common ways to use these alerts.  If you are watching your stocks very closely, you can use these alerts similar the way you'd use a real trailing stop.  You can have one alert window generate stop loss alerts whenever your long positions move down, and have another window generate stop loss alerts whenever your shorts move up.

For more general information you can put the up and down alerts into the same window and watch all of your stocks.  This acts a lot like a standard stock ticker.  The difference is that most stock tickers list the stocks as red or green depending only on whether they are up or down for the whole day.  These alerts to show you which stocks are up or down for a shorter time frame, and you can configure them to adjust that time frame.

If you use real trailing stops in your trading, these alerts can help you determine the best values to use for these stops.  Often when you use a trailing stop you are surprised how quickly you are stopped out.  Traditional backtesting tools are not precise enough to simulate a trailing stop.  If an up candle is very tall, does that mean that the stock went straight up?  Or did it move back and forth a lot in the middle of the candle?  Use these alerts with our history feature to see just how much a stock typically moves around in these smaller time frames.

More options related to these alerts are listed below.

Alert Info for Trailing Stop, % Down [TSPD]