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Using trailing stops in a trading System
Mon, Sep 22 2008, 13:48 GMT
by The Trader's Journal Collaborators
This article is taken from the Trader's Journal magazine (September 2008 issue)
The author, Charles ‘Chuck’ LeBeau, began trading his first commodity system in 1963 and has been an active systematic trader in the stocks and futures markets for more than forty years. He is the co-author of Computer Analysis of the Futures Market (McGraw-Hill, 1991). It is considered to be a classic work in technical analysis and is published worldwide in seven languages.
- Chuck LeBeau discusses the use of exit strategies in designing a trading system. In this installment, he discusses the use of the “Channel Exit.” This method takes a popular entry strategy and applies it to exiting the market with a trailing stop
The necessary precautions have been taken to avoid catastrophic losses by using disciplined money management stops. Now, it is appropriate to concentrate on strategies that are designed to accumulate and retain profits in the market. When properly implemented, these strategies are intended to accomplish two important goals in trade management – they should allow profits to run and at the same time, they should protect open trade profits.
While their application is extremely wide, we do not believe that trailing stops are appropriate in all trading circumstances. Most of the trailing exits we will describe are specifically designed to allow profits run indefinitely. Therefore, they are best used with systems that are trend following.
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Other article in this issue:
Published on Mon, Sep 22 2008, 14:22 GMT
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Legal disclaimer and risk disclosure
This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is sold with the understanding that the authors and the publisher are not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional person should be sought. In commodity trading, as in stock, and mutual fund trading, there can be no assurance of profit. Losses can and do occur. As with any investment, you should carefully consider your suitability to trade and your ability to bear the financial risk of losing your entire investment. It should not be assured that the methods, techniques, or indicators presented in this magazine will be profitable or that they will not result in losses. Past results are not necessarily indicative of future results. Examples in this magazine are for educational purposes only. This is not a solicitation for any order to buy and sell. The information contained herein has been obtained from sources believed to be reliable, but cannot be guaranteed as to accuracy of completeness, and is subject to change without notice. The risk of using any trading method rests with the user.Related reports
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