Article Categories

»	Arts & Entertainment
»	Automotive
»	Business
»	Careers & Jobs
»	Education & Reference
»	Finance
»	Food & Drink
»	Health & Fitness
»	Home & Family
»	Internet & Online Businesses
»	Miscellaneous
»	Self Improvement
»	Shopping
»	Society & News
»	Sports & Recreation
»	Technology
»	Travel & Leisure
»	Writing & Speaking

Reprint Article Code

Category: Articles » Finance » Article » Article Code

(TSR) Why Are We Giving Away These Trailing Stop Loss Tips for Nothing - This Is Not A Misprint

Article Title:

Article Body:

A trailing stop loss is calculated in a manner like the way we calculated our 
initial stop loss. The only difference being that while we calculated our stop 
loss from the entry price, we're calculating our trailing stop loss from the 
highest price since entry. The key to the trailing stop loss is that you need to 
make continual adjustments to make sure that the stop is moved in your favour. 

The method that you use to set your trailing stop loss can vary dramatically. 
However, if we use the ATR method that we used to calculate our initial stop to 
set our trailing stop loss, we'll have the ability to lock in the profit as the 
share price increases. 
For example, if you bought a share at one dollar, and your initial stop was 
set at 90 cents, your trailing stop would also have a value of 90 cents. If, 
after the first day, the share price moves in your favour and moves to $1.10, 
you would recalculate your trailing stop loss by subtracting two times the value 
of the ATR from the new high price of $1.10. For simplicity, let's assume that 
your stop size hasn't changed, and is still ten cents wide. When you calculate 
your new trailing stop loss, by subtracting the 10 cents from $1.10, it would be 
set at one dollar. 
At this point, your initial stop was at 90 cents, and your trailing stop loss 
is now at a dollar, with the share price is at $1.10. Since your trailing stop 
loss is higher than your initial stop, the initial stop becomes obsolete, and 
our trailing stop loss becomes your active exit.
Now, my question is, How much profit have you made on this trade? The share 
price is at $1.10 and we entered at one dollar. If you thought, No, I haven't 
made any money, then you'd be right on track. Remember, our stop loss strategy 
gives the share price a little bit of room to move. 
You're not going to exit this position until the share price reverts to one 
dollar. I'ts important to note that when you are valuing any open position, you 
should always value it based on its stop loss value, since if you were to exit 
this share, you would wait until that price point was breached.
Let's go back to the example. Now, what happens if the share price begins to 
fall? Let's say that the share price falls from $1.10 down to $1.05. What does 
your trailing stop loss do? Would it move down also? Here's another important 
point. A stop loss will never, ever move down. A trailing stop loss can only 
move up. This ensures you lock in profit and that you'll also get out of the 
shares once they start to turn. A trailing stop loss is always calculated from 
the highest price since entry, so the highest price is still $1.10.
It's not until the share price makes a new high since entry that the trailing 
stop loss would begin to move in your favor again. However, if you're using the 
ATR method, there's another way for our trailing stop to move up. This would 
occur when the volatility of a stock begins to decrease. If a share price were 
to begin to move sideways, the ATR value would start to drop off. This would 
cause the trailing stop to move up as the share price became less volatile. 
The best way to understand these concepts is to print out a chart with the 
ATR values along the bottom. Then on the chart, identify the point where you 
would have received an entry signal, and mark your initial stop loss and your 
trailing stop loss.
As the trend progresses make sure that you recalculate the value of your stop 
so you can begin to get a feel for the way this method of using a stop loss 
works Seeing how the changes in stock price affect you trailing stop loss will 
give you the confidence to make them a key part of your trading system.

Author Bio:

Some other recently published finance articles

Tenants With Poor Credit Even Enjoys Loan by Turk Malloy
Tenants lack of collateral which raises doubts in their minds about availability of loan. Now tenant loan has come with a great relief to ...

The UK Consumer's Guide to Shopping for Car Insurance Online by Mary Simone
To be truly successful at shopping for car insurance online, the consumer must find the best deal available on the Internet, not merely ...

Are You Throwing Your Money Away? by John Cranley
Dear Readers, ...

Easy personal loan to finance your desire! by frank howard
Whatever the reason it may be you can seek a personal loan to finance your desires whether you are planning to equip your ...

Bad credit consumers can still find sources of financial assistance by Martin McAllister
In the last few years, consumer debt in Britain has been spiralling: from credit card debt to large mortgage burdens, it seems that UK spenders have become a nation of borrowers. A recent article ...

Setting up a Merchant Account by John Tillman
Simply explained, a merchant account is the way to accept credit cards as a form of payment for products and/or services on your website, online store (like Ebay), or brick ...

Publisher Guidelines

You may reprint this article electronically in your newsletter or on your website, free of charge.

If you reprint this article from our site, then you must keep everything intact. This includes the articles title, author name, articles body, authors bio / resource box, the links contained within the article, all copyright notices and the link pointing back to our site. All links within the article must also be made active / hyperlinks.