Topic: Any reason NOT to use trailing stop? (Read 2660 times)

Hi and thank you for your answer.

What I wanted to show with this graphic is that by choosing to small of a percentage, you could get less profits than possible - this is frustrating but you still don't lose money.

Exactly. I'm reading to win less, as long as I can get the emotion out of the equation.

I a world where 100% of my attention would be focused on any crypto I invest in (which is esssentially impossible), yes. But many cryptos, sleeping, having a life... Paper is not a solution, at least for me. Robots required.

Interesting, as long as you have the right chart (most cryptos don't)

Besides, I contacted Kraken and below is a part of their answer that particularly stroke me:


Granted, maybe what is right for major league currencies (ltc, btc plus fiat, that is Kraken's) might not hold true for minor league (e.g. Mintpal/Cryptsy). But still, that turned me somehow off on trailing stop. If I just need to tweak the percentage, this is OK, but if it is more than than, well...

A trailing stop by definition 'trails' the market price and is used to either limit loss or lock in profits during a trending period.

Your graphic shows an upwards trend and an exit 'taking profit' once a certain price point or target is reached that is not an example of a trailing stop that is a take profit.

I have used trailing stops extensively in trading and they are very effective if you are able to chose the right type of trailing stop for the market you are trading and also match it to the outcome you are looking for. By that I mean a trailing stop for a trade outcome of a few days will be different to a trailing stop for a trade outcome of a few weeks or months. There are many ways of calculating what type of trailing stop to use. I had a preference for a stop that took into account the volatility of the product being traded and enabled you to stay away from 'average' price fluctuations whilst following the overall trend. You always have to prepare however to be stopped out of a position and then see the market  carry on without you, no calculated stop is perfect, but overtime they allow you to remove emotions from your decision making and exit mechanically.

Most BTC exchanges are are new and not sophisticated in the type of trading 'tools' they offer (yet) as Bitcoin evolves this will change and sophistication will increase. That is why the exchanges you mention don't offer such things as trailing stops. You can however do your own trailing stop on a piece of paper or spreadsheet and manually update it and take appropriate action when price moves against you.

You may find this resource interesting http://www.incrediblecharts.com/indicators/atr_average_true_range_trailing_stops.php

Hi,

The more I read about trailing stop orders, the more I like it. The main issue is that most exchanges don't support it (out of kraken, bitfinex and, once volume reaches a reasonable level, swaphole.com).

I din't see much reason no to use it (when it is available). Here my list:
1. Extra fees (kraken doesn't charge extra AFAIK, but swaphole does - bitfinex I don't know)
2. Overconfidence, feeling of complete security (although I don't think this is really an issue)
3. Potential miss of money in case of a quick rebound, like the picture above (trailing stop to sell will miss the second line - it of course depends on the percentage on your trailing stop). This also holds true for a trailing stop to buy, just reverse the chart)
4. Generalisation of trailing stop may lead to lower volatility (but this is not something, as an individual, we can do something about in one way or another)



Do you validate these reasons? Do you seen any other reasons not to use trailing stop?

Thank you.

Edit: some other readings regarding trailing stops which corroborate my opinion (I hope I avoided confirmation bias)