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Trade Plans
Trailing Profit Stops
Last Activity 1/19/2018 2:21 PM
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JIm_in_england

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Subject : Trailing Profit Stops
Posted : 1/25/2015 10:39 AM
Post #35100

Can anyone help me understand the arithmetic behind the calculation of trailing profit stops in an EOD system.

The symbol I am trying to follow has closed at all time highs on each of the last 3 trading sessions.

The most recent session the closing price was 39.99 and the ATR was 0.825
The previous session the closing price was 392.3 and the ATR was 0.828
The session before that the closing price was 38.26 and the ATR was 0.816

The ATR in the session the stock was purchased was 0.659 and in the session before that 0.638

The current TPS is 37.214

If I take 2x any of these ATR's and add it to the current TPS the result does not relate to any of the recent closing prices.

I am clearly misunderstanding something.

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JIm_in_england

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Subject : RE: Trailing Profit Stops
Posted : 1/25/2015 12:38 PM
Post #35101 - In reply to #35100

I may have cracked this. Am I right in assuming that the ATR which is used for the purpose of calculating the cushion is the 14 period average and it is applied to the highest low price rather than the highest high price?

Does anyone understand the logic of using the highest low rather than the highest high?
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Jim Dean

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Subject : RE: Trailing Profit Stops
Posted : 1/25/2015 1:01 PM
Post #35102 - In reply to #35101

Click here for a thread that discusses this in detail, and provides OLang code which emulates the canned stop, and which also combines the functionality of a fixed loss stop with it. After reading that thread, do a search on the TT forum for "trailing profit stops" and you'll find several other nifty variations.

The ATR in the canned stop is a 14-Pd Wilders smoothing average. The reason (afaik) for using the highest low is to prevent nuisance exits by bars with exceptionally long shadows and wicks. If you go the OLang route, that's easy to change.

[Edited by Jim Dean on 1/25/2015 1:04 PM]

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Jim Dean

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Subject : RE: Trailing Profit Stops
Posted : 1/25/2015 1:09 PM
Post #35103 - In reply to #35102

Oops - I pointed you to the wrong thread. The one in the prior post is an explanation of terms with many examples. Click here for the thread that includes the OLang code.
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