About the floating stop loss setting

article originally from FMZ.COM ( A place you can create your own trading bot by Python, JavaScript and C++)

About the floating stop loss setting

The only secret of trading is that there is no secret, just because they are too common to be experienced and sentimental. Such secrets have been summed up in a few hundred years.

Nothing else but the stop loss, that is, controlling losses; Sticking to the trend is to use the current price trend as an objective basis, without your own subjective speculations; capital management, always use the funds that you can afford to participate in this game.

Today, let me talk something about the floating stop loss.

As we all know, there are many ways to set the initial stop loss, such as: fixed value stop loss, fixed ratio stop loss, key price stop loss, shape stop loss, etc. However, the stop loss does not only include the initial stop loss. There are many details about the stop loss. For example, after the profits exceed the cost, is the stop loss moved to the position opening price? Under what circumstances should the stop loss be turned into a take profit?

To figure out how the floating stop loss changes gradually as the market changes, let's figure out the difference between the initial part of the stop loss and the subsequent floating part:

The initial stop loss mainly refers to the planned stop loss position when intervening in the market, and its setting is objective. According to the morphological trend, key price or fixed value, arrange the exit path when the market does not develop as expected.

The subsequent floating part is mainly to solve a series of details such as how to move the stop loss after the market moves to the expected direction, when to move the stop loss, how to turn the stop loss into the take profit position.

What kind of dilemma can be avoided by solving the above floating part problem?

Presumably many friends have had this experience:

After entering the market, the price trend broke out, then stepped back on the cost price, and finally stopped the loss; or quickly moved the stop loss to the cost price after entering the market, the price returned to the cost price, forced to break even, then the market broke out again, missed the opportunity. These embarrassing situations occur because the floating parts of the stop loss are not well resolved.

There are two aspects to the setting of the floating part of the stop loss that require special attention:

First, after entering the market, you should not move the stop loss to the cost price after only a few points of profits. It is easy to be swept back and forth by the moving price, causing you to respect the market, the market does not respect you, and you always being driven out of the latest darkness before the dawn. In order to avoid turning from profit to loss, the mobile stop loss should be timely, but "timely" should also pay attention to "appropriate". The stop loss can be moved to the cost price after the market has gone for a while, or when it is turned back in a sub-time level.

Second, the mobile stop loss has certain subjectivity compared to the initial stop loss. When to move, how much to move is a judgment of subjective experience. From the perspective of preventing profit retreat, setting the trailing stop loss itself is no problem, but be sure to pay attention to the timing and the size of the moving point. With some floating profit, the price can be immediately moved to the cost price when the price breaks through the most recent support/resistance level. Only in this way can we effectively avoid becoming a "bystander" who is easily swept out.

In summary, both aspects are telling us:

Floating stop losses should be “in time” and “appropriate”. Timely is to keep profits, avoid turning profit into losses; appropriate is to avoid being easily stopped by the market or eliminated before the market moving is launched again.

So what is "appropriate"? How to accurately define this concept? To be honest, this is a process in which the benevolent see benevolence and the wise see wisdom, but the fundamental is actually the dynamic balance of winning-odds and winning percentage. If the hour k line is used as the basis for entry the market and the day k line is used as the basis for exit the market, then the winning-odds are guaranteed, that is, the profit-loss ratio is guaranteed, and the winning percentage is relatively high. However, if the 5-minute k line is used as the basis for entry, the day k line is used as the basis for the exit. Although the winning-odds are even higher, the winning percentage is greatly reduced. Therefore, controlling "appropriate" is more about the cognition and perception of winning percentage and odds in everyone's mind.

Only by finding the “timely” and “appropriate” in your stop loss can you say that you have a clear and effective trading system. What remains after this is the basic fund management and mentality control issues. After solving these problems, you can improve your execution ability. As long as the price don't touch the stop loss, let the position run all the time.

By simplifying the trading and removing the complicated and non-positive subjective judgments, the trading can be integrated into your own behavioral habits, and the objective signal trading method becomes as natural and skilled as eating and sleeping.

Having said that, I would like to solemnly remind you that you must strictly abide by the trading discipline and strictly enforce the stop loss.

A nation lacking basic ethical standards and codes of conduct must be a nation without cohesion, combat power, and scattered sand; a company with few disciplines must be a company with low internal management and unsustainable profit; a basic "precept" "Practitioners who are unable to abide by, will certainly not experience the joy of "fixing" and the joy of "wisdom"; a trader who ignores "trading discipline" and cannot abide by "trading discipline" must not continue to make money in the market!

“Trading Discipline” enables us to ensure that we do not engage in extremely risky trading opportunities; “trading discipline” allows us to avoid indulging in unfavorable trading and not being able to extricate ourselves; “trading discipline” enables our trading plans to be truly implemented, truly “Knowing and doing”; “trading discipline” enables us to trade in a more peaceful state of mind, thus having a better trading psychology and therefore better judgment and market feeling... “trading discipline” is the trader’s The basis for the survival of the speculative market, the guarantee of sustained and stable profits.

As a trader who want make profit, we must let "trading discipline" flow into our blood, deep into our bone marrow, and become part of our lives. In this way, in the front of the tides and the market’s clouds, we can watch and smile without fear.

article originally from FMZ.COM ( A place you can create your own trading bot by Python, JavaScript and C++)