【Episode 3】 Trailing Stop at Entry
The third installment of “System Trading for Top Intelligence” introduces trailing stops at entry.
The main site isInitiative-Future Thinking System TraderThis covers a wider range of events, but in “System Trading for Top Intelligence” we will delve deeper into the themes, so please bear with us.
【What is a Trailing Stop?】
A trailing stop (a profit-following type stop order) for buy orders means that after entry, when a new high is made, you move the stop order up by a pre-set amount. The trailing stop for sell orders works in the opposite way: when a new low is made after entry, you move the stop order down by the pre-set amount.
For buy trailing stops, as the price rises, continuing the position increases profits, while even a small reversal triggers a closing of the position. If the profit-taking point is higher than the entry point, profits are secured, which is a logical way to place orders. However, it is worth noting that it is often difficult for the profit-taking point to exceed the entry point, which creates a trade-off with win rate.
If your broker does not offer trailing stops, you must place them manually, which makes changing the stop orders cumbersome. Recently, however, many securities companies offer trailing stops. Advanced traders should try trailing stops at the entry side. It yields reasonably good performance.
【Applied Trailing Stops】
As an applied form of trailing stops, you can decide the fixed width (the pre-set value) by the next period’s volatility, or you can adjust the fixed width as time passes. Trailing stops do not have to be triggered immediately after entry; you can set a trigger that activates once prices meet a certain level.
Usually, fixed widths are tightened, but it may be interesting to have the width widen as well, offering a unique twist.
There are approaches where the calculation starting point is not limited to highs or lows but uses close prices or midpoints. However, if made too complex, it may undermine the original concept, so be cautious.
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Top Intelligence is a term derived from top athletes, meaning athletes who use their brains. Trading also requires practice and imagery training like athletes. In practice, you never know what will happen, but results are expected, just like athletes. And for that, we continue training. There will be times when things don’t go well, but we pursue the peak with an indomitable spirit (resilience) and never give up.
Until now, elites and intelligence have often been associated with fragility and delicacy, but we aim to unleash what you might call a hybrid vigor and push forward aggressively. Let’s walk together toward the ideal of a top intelligent who is intensely resilient, not just a top athlete.
As for strategy, we strive to disclose it as much as possible and adopt an open-source approach. By refining outputs and ideas, let’s evolve each other’s investment techniques.
