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Realtraders,
There is no perfect methodology (only opinions and preferences),
but this is an interesting topic..
I wish there was time to respond fully, but need to get ready to
leave for Florida..
My suspicion is that trailing stops would test better than
profit objectives in a mechanical system, but the inverse if
a mechanical system is compared to a good trader. (Interesting
concept, good trader vs good system, no offence meant, perhaps
should reword this. No offence, please forgive.)
A trader who is good at choosing non-mechanically determined
profit objectives (though using Fib formulas as input)
would not enjoy seeing profits consistently given back while
price retraces to a trailing stop, and then have slippage
due to closing in a market going against him/her. The downside is
that this trader has to ignore the cases where price keeps going after
reaching the profit objective (but this is less of an issue
the better the trader is at picking correct profit objectives).
Best wishes,
-Neal.
PS. 100% cash, taking a deserved holiday! Maybe I'll see you
at the Omega conference?
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At 12:42 PM 4/29/98 -0500, Scot Billington wrote:
>
>>My problem is not so much the initial "fail safe" stop, but figuring out how
>>to protect profits. I have been looking at both taking profits at targets
>>(eg. Fibo targets), and letting profits "run", and trailing stops, and being
>>taken out of the trade.
>>
>>Any opinions on what works best, or what, for instance, would serve as a
good
>>trailing stop?
>
>In every test I have done trailing stops outperformed targets. The problem
>I see with targets is that at some point the market is 1 tic from your
>target. You are now risking to your stop for the possiblity of 1 tic.
>Also, why limit you potential? If you are very against giving back
>profits, tighten your stop.
>
>There is no 'magical' stop. Generally, any of the well known indicators
>(moving averages, parabolics etc.) will lock in profits at an increasing
>rate. They will all perform basically the same, within their time frame,
>over a lifetime of trading. The time frame on which you trade will dictate
>the parameters of a trailing stop. I suggest as long as you can stomach.
>
>Beginners go broke by letting their losses run. More experienced traders
>go broke by cutting their profits short.
>
>
>Scot
>
>
>
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