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3 Trailing Stop Loss Strategies That Maximize Profits - Trailing Stop Thinkorswim - YouTube
Channel: Riley Coleman
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So what are trailing stops in this video
I'm gonna go over three different
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trailing stop strategies that you can
use to not only protect your profits but
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also not miss out on any potential gains
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hey how's it going on this channel
you'll learn the steps I took to go from
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trading with the full-time job to
trading as a full-time job so if you're
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new here consider subscribing and at any
point in the video make sure to check
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out the notes and links in the
description below I'll list out any
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valuable resources down there now to
date we are going over trailing stops so
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the three different trailing stops we're
going to talk about are going to be an a
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moving average trailing stop a just a
general price action trench trailing
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stop and then a Fibonacci trailing stop
and to illustrate those we're going to
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talk about a trade I previously did in
another video now if you want to look at
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the whole walkthrough of that trade I
will link that in the YouTube cards up
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here so the first one we're going to
talk about is a moving average trailing
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stop now I use exponential moving
averages but you can just as easily use
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simple moving averages if that's when
you generally use now I have found is an
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8 exponential moving average is a pretty
strong indicator of a strong uptrend so
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if once a stock is moving rapidly in a
strong trend it'll hold that 8 moving
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average or that 8 exponential moving
average if it's going to keep in that
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trend so right here with Boeing you can
see that I bought in down here and
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Boeing eventually came up here but it
did have to have a pullback at some
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point so it ended up coming back down to
this teal EMA I have and that is an 8
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day exponential moving average and it
held that as support it bounced along
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this EMA three times before continuing
with this really strong uptrend
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eventually you can see that it did come
down and try and hold this ATM a but
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once it broke that ATM a the trend
reversed and you can see now that the
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stock has come really far down and
you're definitely gonna want to be out
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of the trade at that point now if you're
waiting for this ATM a to break on a
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daily chart you would have probably
closed out way down here which would
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have lost you a lot of money
so as a stock gets extended and it gets
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really high from this huge move that
it's going with and it starts to hit
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Fibonacci extensions I believe the one
two seven two extension was about here
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and so once it hit that extension that
shows you that you need to start making
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your trailing stop a little tighter and
so what I mean by that is instead of
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using a 80 ma on a daily chart you start
looking at an ATM a on a smaller time
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frame so maybe a 30-minute chart so if I
change this to a 30-minute chart and
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zooming in on that more that last kind
of move that there was right before we
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sold you can see that the stock with
this large trend is essentially holding
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that 80 MA and then once it breaks at 80
ma right about here that is when you
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want to sell because the main idea here
is that this uptrend this really strong
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trend that it's having is over and that
on a larger timeframe the stock is
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extended based on those Fibonacci
extension levels and so you're gonna
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want to use that as a signal to get out
of your trade or potentially get out of
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some of your trade you don't have to
sell everything at this point you could
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sell some of it and then based on
another trailing stop in a larger
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timeframe you could sell the rest the
whole idea behind trailing stops is that
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you are capturing the easy money
maybe the trend is gonna keep going here
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but the easy really strong trend where
you're not gonna have to sweat losing
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any of your profits is over once it
breaks this ATM a over here but also
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what it does is it allows you to stay in
the trade you don't have to worry as the
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stock goes up and starts having these
little pull backs in here that that's
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gonna be potentially the end of the move
this gives you a really concrete way to
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be completely emotionless and robotic
with your trading and so you have a
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defined strategy on when you're gonna
sell if you just go into every trait
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with the mindset of selling when you
think it's going to be the right time to
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sell
you can be missing out on a lot of
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potential gains and a trailing stop
allows you to manage your gains so you
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don't miss out on e but also manage your
losses so you know when it's time to get
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out or our price action trailing stop
this is gonna be a more on the idea of
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if the stock is creating higher highs
and higher lows though all that is is if
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the stock is kind of making this upwards
zigzag fashion and initially when you're
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in the stock you're gonna want to have
it on it again just like the last one
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you're gonna want to have your trailing
stop on a larger timeframe because you
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want to give the stock space to have
your idea be right
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initially when you're in a stock
sometimes it can be you know right when
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you buy it it can be a little bit more
choppy and then once it really starts to
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do that breakout that's when you want to
have your trailing stop get tight so you
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want to tighten your trailing stop when
it starts to get into this kind of area
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of the trade you want to have a larger
trailing stop when it's in this kind of
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area of the trade because you don't want
to get stopped out on a little down move
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like one of these and then have this
stock just rock it up without you and
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realize that well you were right and if
you didn't have a tight trailing stop
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like that you would have hit the trade
and had a perfect trade having a wide
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trailing stop in the beginning and then
as the stock starts getting extended in
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the direction that you're trading and
tying your stops up then is a lot safer
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way to protect your profits and also not
get stopped out of the trade before it
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really happens so once we would have got
into this area up here again seeing that
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the stock was just taking off like this
and hitting these Bonacci extensions up
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here we would have want to go into
another shorter time frame chart so
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again we can just use a 30 minute here
as an example but you always want to try
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and fit your time frame for what you're
trading so that could be a 5 minute or
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even a multiple hour chart just
depending on what your trading time
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frame is so looking at this chart
a 30-minute time frame now once it
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started to get in that huge up move here
we can see that it was following that
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higher highs and higher lows mentality
here and that's how we would have wanted
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to keep in the trade we don't want to
close the trade until it breaks that so
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the trade once it came down here it
actually broke that last low showing you
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that well this higher high and higher
low trend is now changing and then you
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definitely got a confirmation here when
it made a lower high and then as you can
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see it started in this downtrend and so
that can be a place where you would want
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to close out this trade when it breaks
down there because again the easy money
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is gone this short time frame trend is
over and with the stock already being
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extended on a daily chart even though
this is a 30-minute chart this is going
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to probably be the last kind of leg up
or strong up move before it has that
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huge reversal on a daily chart and
you're not going to want to hold through
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that if we zoom back out to a daily
chart you can see that the stock has now
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come down really far and you're not
going to want to hold through that
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because now it's basically back to where
I previously bought in so for our
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Fibonacci trailing stop we're gonna
again zoom back out to this larger time
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frame and I'm gonna take a Fibonacci
retracement of this larger swing here so
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I'm gonna take this high to this low and
that's going to show us these levels now
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the basic idea of how this kind of fib
trailing stop works is as the market
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breaks through these fib levels and then
comes back down and taps them and who
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uses them as support we don't want to
see the market all back through that fib
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level again if it falls back through
that fib level again we're gonna say
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that this trade is over and easy money
is gone because this could potentially
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say that the stock is going to keep
falling and start a new downward
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friend so zooming into this to walk you
through that we have this initial entry
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level fib area you can see that this is
the six one eight and it's starting to
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hold this if the stock ended up coming
up here bouncing off that six one eight
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level and then selling bound through it
and breaking that zone that's where we
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would have wanted to sell because that
fib level is broken moving on as the
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stock moved up this seven eight six
level would have been our next level of
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support so as the stock broke up through
it it's going to be support now and you
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can see that this stock did hold it as
support once it bounced off of that
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level and started to come up here we
wouldn't have wanted to see the stock
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fall through here and break this an area
of support that we previously held that
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would again signal that we're breaking
through that support and this could
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signal a start up a downtrend once the
stock broke up all the way above this
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one to seven we would have wanted to see
again it hold that one to seven for us
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to continue holding this trade zooming
into a smaller time frame chart here
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once the stock broke above this one to
seven level it came down and hit that
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one through seven level and bounced off
of it as support here and you can
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actually see that the stock then came
down and bounced off of it again and
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then started to make that next move
higher and this would have been looking
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great for the trade to keep going up but
again if it came down and Baroque brew
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this level we would have wanted to close
out on the trade because it's breaking
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through that support looking at this now
you can see that the stock did trade and
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break through this support level and
that is when you would have one to close
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base on this trailing stop strategy and
cover your profits because the
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likelihood of this starting a sound
trend now is pretty high and you don't
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want to have to sweat a large pullback
or making further gains with all these
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trailing stops
initially you always want to have a
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larger stop so you don't get knocked out
of your trade sooner than you want it to
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and then once the stock gets higher and
higher into these fib extensions you
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want to tighten up your trailing stop
because as the stock goes higher and
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higher the likelihood of it reversing
gets higher and higher so you want to
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protect your gains but again these
trailing stops are amazing because they
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allow you to stay in the trade
essentially to the top with this trade
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right here I definitely didn't sell
right at the top but looking at the
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chart on a larger timeframe you can see
that I got pretty dang close to selling
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at the top it essentially looks like I
sold at the top and so these trailing
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stops are really powerful for doing that
you never have to be worried about
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making a wrong decision when closing a
trade for profits because these
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strategies are very strong and showing
you that the easy money is over and that
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you should get out and then just start
focusing on another trade yes the stock
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can keep going up but again there's no
way to predict anything in the stock
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market and generally stocks will fail at
these extensions sometimes you can get
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stocks that just keep going and going
but nine times out of 10 they're gonna
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fail at the one to seven or the one six
one eight and so these trailing stops
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allow you to close at those levels but
also allow you to keep the trade going
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if it keeps going higher hey thanks for
checking on this video if you wanna
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learn more about how to use those
Fibonacci levels and use Fibonacci in
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your trading make sure to check out my
playlist on Fibonacci right here now if
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you want to just learn more about
trading in the stock market make sure to
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subscribe if you have any questions
don't hesitate to ask them in the
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comments below
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