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Follower ○○○

use of trailing stops

does anybody regularly use trailing stops?  How has it worked out for you?  This is strongly recommended, especially for volatile times, but I personally don't know anyone who uses them.  I have been tempted but to date have not utilized them either.

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Frequent Contributor

Re: use of trailing stops

Regular use of trailing-stops is very risky. In case of sharp/sudden declines, or in a flash-crash, stops [regular or trailing] become market-orders and can be filled badly at much lower prices.

I do use them for short-term trading. For example, if I decided to sell a holding, I may enter a limit-sell [safer but it may miss] or a narrow trailing-stop. But these are for short-term and for specific situations.

YBB
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Follower ○○○

Re: use of trailing stops

I have most often heard that one ought to consider trailing stops, set at perhaps 15%, to protect potential profits from turning into losses in the event of a quick turn in the market.  In this context, it sounds like one could use them even more for cases in which there have been considerable gains over a reasonable period of time that the investor does not want to see evaporate given the potential for a covid crash, for example.  Do you think it wiser to let it ride in those circumstances, than protect most of the gain?

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Frequent Contributor

Re: use of trailing stops

Only use stops on a daily basis. Rarely carry them over, a never carry them into a weekend. I also monitor them closely during the day and watch the volume as an indicator of the direction to where the stock may be headed.

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Frequent Contributor

Re: use of trailing stops

Keep in mind that 15% trailing-stop may be filled at 20% or 30% or 50% below the high-water mark.

What happened in flash-crashes was that after terrible executions for stops, stocks rebounded quickly.

Another issue with them is visibility. Market-makers tend to hit nearby stops to clear the deck. Often, a stop is hit but stock turn right up.

Some might say to use stop-limit but that has its own complications.

YBB
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Follower ○○○

Re: use of trailing stops

Thanks for you advice, all.  I conclude that it is basically not a good idea to use trailing stops. 

 

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Participant ○

Re: use of trailing stops

I use them often, especially for shorter term trades and when something is running up quickly.

Right now, for CEFs such as DSL that I bought about one month ago (same for UTG).  For CEFs, I typically use a 6% stop when they have run up quickly.

Yes, these can trigger in a mini crash.  Also, you may sell lower than the stop, i.e. about 8% lower for me.

Still, I protected most of my gains.  This worked well in March..  

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