Every trader should know when and how to using a trailing stop. It’s one of those fundamental trading techniques. Essentially, it’s a way to “lock in profit” when trading two or more contracts. When price meets a specific condition, you close out one of the contracts that has reached profit territory. This video is designed to answer common questions: what types of trades are compatible with trailing stops? What values should the trailing stop use? How do I go about placing these stops in my trading platform?
Some strategies work better with trailing stops than others. For example, the Roadmap strategy (taught in Mentorship) works great because it happens before the move or right in the beginning of the move. In comparison, the ATO and Blueprint strategies are less compatible because the move usually has already begun. The Atlas Line and X-5 work well, however, providing you catch the trade early. For trailing stops, you need to be using a method that finds trades very early or before they happen.
Trending conditions are great for trailing stops because of the consistent direction. When the market’s ATR (using a period value of four) is around one point, the market probably isn’t going to trend, so be careful with any trailing stops. Normal levels of volatility, when the ATR between two and three points, increase the chance of trending conditions. Normal to higher than normal volatility periods are ideal for trailing stops.
When using trailing stops, John Paul likes to use a minimum of two contracts or multiples of two. When you first start out, even if you can afford it, avoid trading many contracts because it increases the risk. Work your way up responsibly. When the market starts to move, half of the position is removed of the trade.
The best way to learn all of the strategies that work the best with trailing stops is to take part in the next Mentorship Program. Click here for details. Considering all that you get, it’s a great deal and an excellent way to learn from John Paul directly during eight weeks of live, all-inclusive coaching.