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Online Share Trading

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Stop Loss

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Sugar_Snap
Frequent Contributor
Which one of the 2 methods are better, trailing or fixed ?? I am not too sure how trailing works, when does it hit the stop loss if it keeps on moving with the share price ?
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15 REPLIES 15
cfm
Super Contributor
A trailing stop loss only moves in one direction. Assuming you are long, the trigger price of the stop loss only moves up. If the share moves down, the trigger price stays the same. Should your share drop down to the trigger price, the stop loss will execute. (The other way round for a short trade.)
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Sugar_Snap
Frequent Contributor
Thx cfm, so it seems to trail is a better option, that is if you are a wave runner. I will try this in future.
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barry_1
Super Contributor
I dunno bout futures,but find for WARRANTS the fixed stop-loss is better....i set it every evening after 9pm at 20% discount to the price...i also do not ever DECREASE ,but only INCREASE the price....i have found over a fairly long period that on volatile shares such as AMS a trailing stop-loss might shoot up and whith-in minutes fall again ,so triggering the stop-loss.In a rising market this then leaves u out of the action and it is sometime difficult to get back in,or even worse only at a higher price.
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JDT
Regular Contributor
I agree with Barry. I've found that manually trailing your fixed stop to support or resistance levels works better.
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cfm
Super Contributor
I actually find that automatic stop losses are almost useless. I set them very far beneath my intended exit level as a safety net for when I'm not available. Typically, I would exit before the stop loss is hit.
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Theater_Cat
Super Contributor
Beware trailing stop losses that are too tight. For example, you buy AGL at R230 today. You are happy to set a FIXED stop loss at R220. Now when you set a TRAILING stop loss of R10 and the share rises to R238 and then drops R10 to R228 you get stopped out at R228 (i.e. long before your accepted loss of R220). I prefer to set daily fixed stops.
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Shard
Super Contributor
In a volatile market, vigilance is required, hence manually adjusting fixed stop losses is better. In a stable market the trailing stop loss is a nice fire and forget tool.
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Sugar_Snap
Frequent Contributor
Hi Barry, thx for your input, yes you are so right, that spike effect every now and then is a problem. It caught me once and I couldn't believe this, even asked Std Sec to explain what causes a spike. I sometimes get the feeling that somebody is buying/selling on purpuse at such a low / high price (out of the range) just to shake the stop losses a bit. I think you do have a very valid method of setting stop losses at night. Thx
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Sugar_Snap
Frequent Contributor
Hi JDT, a agree with you, will join you on this method as well.
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Sugar_Snap
Frequent Contributor
Hi cfm, are you a day trader and sit in front of your computer most of the time?
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Sugar_Snap
Frequent Contributor
Thx, your point taken and will follow your method. It seems that there are quite a few traders who do this.
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Sugar_Snap
Frequent Contributor
Thx Shard, it seems that you traders are old hands at this. I got a good feedback very much the same answer.
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cfm
Super Contributor
No, I swing trade based on end-of-day price only. I use SMS alerts to let me know when I need to log on and have a look. I then decide, based on volume and price action, whether or not to sell, or just closely watch the share.
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Sugar_Snap
Frequent Contributor
Hi cfm, can you explain what is swing trade and how do you set your sms alerts on this? This sounds quite interesting !!
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cfm
Super Contributor
Shares don't move in a straight line. Even if the long term primary trend is up, there will be periods of downwards movement. I trade that medium term trend. I look for a change in direction (or a swing). Typicallly, my trades last from a few days to a few weeks with the really good ones a few months. And using futures, I trade both the up and down directions (or long and short to use the correct terminology.) I don't care about the long term trend of the share or the future of the company.

To get a sms, add the share to your watchlist and set an alert (you may have to open settings or configure to add the tools option to your watchlist.)
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